Diana Clement: Teach them young – help your kids grow up financially literate
Everyone wants their children to succeed financially. Teaching them good money habits starts with play, such as playing shop, as soon as they recognise what money is.
Simple actions help grow financially literate children:
Give regular pocket money
Divvy the pocket money into spending and saving, to start instilling the latter. I remember a period when one of my children would demand an instant trip to the $2 Shop to buy some piece of nasty plastic on pocket money day. I was convinced I’d ruined their financial nous for life by enabling that, but it turned out to be all part of the process of learning about smart spending.
Allow them to manage their money
Early on I implemented a system on holiday where the children received $2 a day to spend on little treats instead of hassling me. It turned out to be a wonderful money lesson. They learned themselves if they didn’t spend it daily, they could save up for better treats. In Hamilton one time they pooled their $2 and bought an entire 2L of ice cream in the supermarket. That was another valuable lesson financially, although they felt too sick afterwards for it to happen a second time.
Let them make mistakes
It feels cruel but let them experience getting it wrong. Losing money, for example, is in a sense a choice. One of my children learned that leaving a wallet in the shoe rack at a McDonald’s playground instead of giving it to an adult was a mistake with consequences. That was an especially hard lesson for child and parent, and it took an emotional toll on me not to reimburse the lost money.
Give them budgets
I fell into this earlier than I expected thanks to a child who demanded designer clothing and top-of-the-range sports gear. My answer was to put both children on a clothing budget. At the ages of 8 and 10 they took to this with gusto, choosing to buy their day to day clothing/shoes at the likes of The Warehouse, but saving for months sometimes for extra special items. Budgets can cover much more but read my next point.
It won't be easy
Sometimes the best-laid plans end up never getting implemented due to lack of time, energy, inclination or simply putting off decision making. I always meant to extend the clothing budget to an overall budget once they reached the age of 12, but it ended up getting overlooked, in part because they were heading down the right path anyway. Yet having to make choices such as catching the bus to school versus using that money in the tuck shop for treats, and so on, is powerful.
Talk to your children about money and model good behaviour. Discuss the options for spending that $2, and the consequences of big electricity bills because no one turns the lights out. If you need inspiration check out Sorted.org.nz or some of the very good financial education programmes available through schools or direct online such as Sorted In Schools, ASB GetWise, Banqer, SaVy and PracticalMoneySkills.co.nz.
The word “No” combined with an explanation is a great way for children to learn. For example, don’t let them allow you to deviate from your list at the supermarket.
Get them involved in investing
Even primary age children can understand what companies are and enjoy watching their money grow. If they receive birthday/Christmas money or have earnings, then set up KiwiSaver or some other sort of share market based investing account for them. They can make regular deposits and choose investments, with your assistance. Check out child accounts at low cost investing platforms such as Sharesies, Hatch, InvestNow and Stake. Show them graphs of their money growing, and when the market falls, explain what’s happening.
Finally, do be careful about giving your children a poverty mentality that can lead to giving up before they try.
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