Have you ever wondered what lesson you’re teaching your kids when you give them pocket money? Is it tied with ‘earning’ – if they do more chores around the home they get paid more, which gives them more flexibility about how and where they spend these hard-earned coins? Or, is it just that paying your kids pocket money makes you feel like a better parent?
What about your adult children? Are you one of the 51% of parents still providing monetary support to their kids?
While there’s nothing wrong with providing a bit of financial support, you do want to make sure it’s not impacting your own future financial security, and not stopping them from becoming financially independent.
And the best way to ensure your kids are set up for financial success later in life is by teaching them about money from a young age.
So, what are the lessons we should be teaching our kids about money?
The value of money.
While kids might understand you need money to buy things, they may not fully grasp how much – or how little – that money can buy them. You can start teaching this lesson by playing shop with them, or when you go out to a shop or café get them to guess how much something may cost.
How to earn & spend money
Encourage them to complete value-based chores as a way to earn money, and then discuss their spending options. Should they head down to the dairy every week on payday to stock up on sweets, or save up for something bigger down the track?
Saving for the future
Instead of buying your kids the toys they want with your money, encourage them to save what they’re earning up to buy it themselves. You can also take this opportunity to talk with them about how long they would need to save, and how if they saved a little extra each week instead of spending it on something else, they could reach their savings goal a little faster
The cost of living
Your kids will one day have to pay their own rent, utilities and grocery bills, so get your kids involved in the day-to-day living expenses.
enable.me founder Hannah McQueen tells the story of how she got her eight year old son to manage the expenses of one of their holidays to teach him about money and budgeting. They set a budget for the trip and he had to make sure that all the expenses – from petrol to activities to food, treats and accommodation – came in under budget. The prize? A portion of the savings.
You don’t have to go quite to this scale. But putting your kids in charge of their own clothing allowance, or the weekly food shop, can help them get a better grasp of how far money can get you, and the sacrifices you may have to make if you don’t have enough for everything.
Options for investing are on the rise in New Zealand, including for kids. You can either use an app like Sharesies, other online investment platforms, or go through an investment broker. You could also look at setting them up with a KiwiSaver account when they get an afterschool or weekend job so they can start contributing towards a deposit for their first home, or their retirement.
How to avoid debt
When adults use credit cards and Buy Now Pay Later schemes, we’re showing our kids that it’s ok to use money we don’t have. While they’re best to avoid, if you do use them tell your kids why, and what you’re doing to pay them off on time to avoid fees and interest costs.
What if I’m bad with money myself?
A lot of behaviours are ‘caught not taught’ including those around money. So, if you’re not that financially savvy yourself, you may be worried you’ll pass these not-so-great habits onto your kids.
If that’s the case, it’s important you’re honest with your kids about where you may be going wrong, or the reasons why you’re in the situation that you’re in. You may also benefit from getting help to create better habits yourself – and show your kids that asking for help is ok too.
Teaching your kids financial skills before they enter university or head off to work is crucial in helping them become financially secure and successful adults. And, it can be as simple as getting them to earn their pocket money, involving them in the family finances, and ensuring they’re spending the money they have to hand consciously.
For more tips and tricks , catch our webinar recording where financial experts (who also happen to be parents) give their advice on raising financially independent kids.
Disclaimer: This blog post is for informational purposes only and does not constitute individual financial advice. If you’re interested in receiving personalised financial advice, you can book in a consultation with an enable.me coach. Costs apply.