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.