In the middle of yet another global financial meltdown it seems timely to consider how best to teach our kids about money. Maybe, with some smart money skills, they won’t find themselves lurching from one crisis to the next, a roller-coaster ride that is no fun at all. How prepared are your kids “moneywise” to face the challenges that lie ahead?
I have often pondered this in relation to our own 3 children aged 11, 9 and 3. In my day job as a financial adviser I see the power, and the pitfalls, of money all the time. I see spenders and savers and then every possible combination in between. I see people with a laissez-faire attitude to money as well as people for whom money, and decisions surrounding money, are extremely stressful. Mostly I see wildly varying attitudes to money and money management. Over the years I have come to believe that our relationship to money is highly personal. Often our opinions and beliefs around money have been influenced by our experiences and many of these take place during childhood.
Take me for example. I have always been interested in money matters and who knows if being put in charge of counting my parent’s restaurant takings influenced this. I suspect it did. I grew up in a household where money and business was discussed openly and often. While I am not suggesting you burden your kids with the exact details of the home mortgage (we want our
kids to sleep!) an open discussion about money helps to build awareness. I hope my kids understand and respect money so that they are well equipped for the challenges they may face in the future.
Here are some of the ways I’m approaching this issue but I would also love to hear your ideas. As a wise man once said (my father) “there is no monopoly on knowledge” :
1. Money and work should be related in a child’s mind.
I don’t think this can be overstated. While our parents meant well saying “money doesn’t grow on trees” being more specific is called for. Tying money to work is critical. But how do we do this in a way that makes sense to a child? Saying “Mummy/Daddy works hard all year to take you on holidays” probably doesn’t mean much to our kids. Instead you could try talking to your kids about hourly pay rates. For example you could discuss the fact that a babysitter might get $20 per hour. Then you can start to express the “value” of items by the number of hours required to be worked to actually buy it.
For instance if the jeans they really, really need cost $100 then it would take them 5 hours of babysitting to earn them. Then, if your kids receive pocket money (see below), you can expand this idea by talking about how many weeks of pocket money it would take to buy the things they want. I found our 11 year old was given pause when considering, in order to purchase her Karate silks, she would require 9 weeks of pocket money. Nevertheless she did her jobs and saved her money and 9 weeks later she handed it over the counter and was ecstatic. I reiterated that a large part of the reason she was so happy was that she had worked hard and bought them with her own money. I said this because I believe it is important she not only understands the power of money but also the value of independence.
2. Pocket money is a positive way of teaching money and budgeting skills.
If pocket money is tied to specific jobs done then, not only is the idea of work and money related, the “value” of pocket money in your kid’s mind is increased because they had to work hard to get it. As a guide, in our home, our 2 older children get $5 per week. They get the same sum (despite the age difference) because the same level of responsibility is expected of both of them. I am a believer in a meritocracy. If one child has greater responsibility then they should get more. If one child does a better job at the same task then ditto. I would rather they learn they should approach their tasks with diligence and effort at home, than learn this lesson the hard way in the workforce. As kids, my brothers and I, used to receive one cent per napkin ironed for our parent’s busy restaurant. While there are still plenty of jokes about child labour at our family gatherings I think it was helpful. It was loud and clear to me that work was far from easy. Additionally it put us in control of our own income. One hundred napkins equalled one dollar and that was a king’s ransom! By the way my Mum inspected every single one of them and if they weren’t up to scratch this penny didn’t get a penny.
3. The things you earn are sweeter than the things you are given.
In this day and age, where kids are exposed to consumerism gone awry, I believe this is an important life lesson. We have all been to kids birthday parties where the child rips open gift after gift. What happened to “pass the parcel” when the gift was unwrapped at the very end? And didn’t go to the birthday boy or girl by default!
We have our son’s 3rd birthday party coming up and our girls (who, as an aside, designed the evites & sent them out) practically choked when I suggested the old fashioned “pass the parcel”. The one from the olden days. When they had calmed down the youngest woefully announced “what’s next Mum, no lolly bags?” How did she know?
I’ll report back as to whether there is a meltdown amongst the toddlers but for now I’m convinced everyone will be more excited by watching the present get unwrapped layer by layer and waiting for the payoff. It will teach patience, reward and, guess what, disappointment! My hunch is it is better to learn this at a 3 year old’s birthday party than to discover this later in life.
4. Less is more.
This is when I truly turn into my mother. We were taught the best things in life are free. Sunsets, Rain, Family Time. If you instill these beliefs your kids they might emerge wanting less and consuming less. This benefits not only their finances but also the planet. Win Win.
5. Watch the daily money skills you’re exposing them to.
If you burn the midnight oil online every night buying new clothes (I think I just outed my best friend) and packages are constantly being delivered to your doorstep watch out! You may be raising a spendthrift with a mountain of credit card debt in their future. If you save and plan for the big things, like a holiday, then your kids are exposed to, and are likely to emulate, that behaviour. Fingers crossed.
6. Kids need to be very clear that money is not the solution to everything.
Too many kids grow up listening to their parents groaning “if only we had more money” or bitterly opining that “the neighbours are so rich they just took their kids to Disneyland”. Tread carefully. It is possible the kids will grow up with the idea that money equals happiness and that “money” is the goal. I am forever grateful (yet again) to my mother who dragged us outside to view the full moon or smell the fresh grass and to the countless teachers along the way who impressed on me the idea that happiness comes from within.
Oh yeah and last but not least- money doesn’t grow on trees!
What were you taught about money? If you have kids, what do you teach them?