Money lessons for kids are important at all ages and stages. Whether you’re teaching young kids about saving by giving them regular pocket money or talking to older children about how mortgages, shares, superannuation and credit cards work, there’s no time like the present to teach kids about money.
Why is it important to teach kids to be money smart?
Teaching kids about financial literacy is an important life skill that isn’t consistently taught in schools. That means to give our tamariki the knowledge and understanding about their financial affairs that sets them up for the future, it’s mostly up to us as parents.
Talking about money shouldn’t be taboo
For a long time, it was uncommon for parents to discuss financial matters with their children. Money has been a taboo subject for many families, but we’re starting to see these barriers being broken down as parents learn to have age-appropriate conversations with their kids around money. By teaching your children about savings, budgeting and investing from an early age, kids today stand to gain a helpful financial head start.
Kids can learn the value of money from a young age
Often, saving and budgeting can be a family activity. Talk to your children about the financial goals you have as a family – saving up for a new car, going on holiday, or planning family Christmas. Get your kids involved in deciding what family spending is necessary, and what could be sacrificed to save up for family goals. Getting your children involved in their individual savings goals or supporting family savings goals can really help set them up for the future, as they will have a natural understanding of the value of money.
Setting your family up for the future
Think ahead to when your kids are young adults and head out into the world; knowing they’re empowered to avoid common debt traps or they’re on their way to reach their financial goals sooner will be hugely satisfying for them, as well as yourself.
Unsure where to start? We’ve got you covered with 10 important money lessons you can share with your children.
1. Money skills start with you, as a parent
For young New Zealanders, an ongoing Massey University study has found that parents are the main source of information for personal financial management. Interestingly, the study shows that while young people might look to their parents for money advice, many had doubts about the quality of the advice they were getting. As parents, you’re likely to have the most influence on your child’s financial confidence when it comes to money.
Just because you’re influential doesn’t mean you have to be an expert; you might be learning about how to best manage your money alongside your children. That’s okay! It’s never too late to educate yourself and your family about how to set a budget, save for things you want or need, and how to invest for the future.
There’s lots of support available if you want to be better with money, like speaking to a qualified financial adviser or utilizing a budgeting service. Even free guides and services such as Money Talks, Sorted and tips from Kiwibank can help you feel more confident before you tackle money matters with your children.
Try to think of your family’s relationship with money as something that’s always changing, because it often is. Having age-appropriate conversations with your kids about how you’re managing your money as a family is a great start.
For example, you may be paying down some debt and getting a budget in place so you can gain financial control. Explaining how this process works, and what changes you can make as a family to reach your goals sooner is one practical way to do this.
Sharing your attitudes towards money and the options you have available can be a great learning experience for your children. This way, you can decide the financial direction for your family together.
2. Teach kids the value of money by getting hands-on with it
From a young age, you can teach children about the role that money plays by getting hands-on with it. Playing shops and using toy money to pay for goods might seem small, but it’s a great first step towards basic financial literacy. As your kids get older, get them to guess how much the grocery, café or toy shop items might be; this can help give them an understanding of how much things cost.
You might be able to make those weekly trips to the supermarket more enjoyable (and educational) for older kids if they’re part of the decision making. Try putting them in charge of spotting weekly specials, using a calculator to add up your purchases as you go, or making sure you don’t go over your weekly budget.
Opening a savings account or KiwiSaver account for your children can be another way to educate kids about long term savings or investments. Be aware that a KiwiSaver account can only be used for saving towards a first home deposit or retirement and it will mean that your child will generally have to make contributions to it out of their wages when they start working.
3. Give kids the opportunity to earn and spend an allowance
Earning pocket money is another great way to physically demonstrate how money works, that it needs to be earned, and how far it will go. Pocket money can then be used to save up for something special, or as a real-life example of how much things cost.
Be clear about the chores your children can do around the home – standard chores they need to do as part of your family, and the extra chores they can do to earn money. Some children are keen savers, and others might need a little more encouragement!
4. Encourage kids to plan and save for future purchases
The concept of saving is a tricky one for some kids, so it’s great to get going early with this skill. Let’s say you decide to give your child weekly pocket money for general chores around the house. Instead of spending it right away, encourage them to save up for something more substantial like a special toy or activity during the school holidays. Even putting aside a few dollars each week can add up to something significant over time.
If you need help encouraging them to save, print off a picture of something they want to buy as a visual aid. You could also put their pocket money into a savings account each week, rather than have the temptation of real cash in their wallet or in a money box in their bedroom.
Saving money is certainly a lesson in patience - make sure you celebrate when they achieve their goals. If kids get a real sense of satisfaction when they purchase something they’ve been saving for, it could be a lesson that lasts them a lifetime.
5. Teach your children the joy of giving or sharing
A big part of financial literacy is learning how to show kindness and do good with your money. Whether your kid is saving up to buy someone a present or learning how to spend carefully to make a gift that’s handcrafted, meaningful and inexpensive, it can be an important learning experience. Help your children understand that giving and sharing can be achieved with very little money. No matter if it’s home-baked goods or handcrafted household items, show your children how satisfying it can feel to give to others.
6. Teaching delayed gratification from an early age
We live in a digital world where everything is available instantly or delivered the next day if we have the cash available. Credit cards have made it simple for adults to buy now and pay later, so learning to be OK with waiting for things is something parents and children can master together.
Start your children with small lessons in patience – waiting for their turn at the playground, waiting for dinner to be ready before having yet another snack, or waiting to be tall enough to go on the hydro slide at the local pool are all good ways to start.
Saving money, of course, is another way to teach this life lesson. Whether you help them fill a jar with coins before spending it, put their pocket money into a bank account each week, or use a digital tool like the Kiwibank Goal Tracker For Kids, there are many ways to show your kids that good things take time. It’s worth it, in the long run, to save up for the things you really want.
7. The sooner you start saving, the faster your money can grow with compound interest
Saving up for the things you love is one thing, but watching your money grow each month is a fascinating learning journey for your children. Compound interest (very simply - interest earned on interest) can be tricky for adults to explain, but luckily there are some great online resources available to simplify these concepts for kids. They can be quite helpful for adults too, and a good reminder that it’s never too late to start that savings plan. Check out YouTube for helpful guides, and our simple explainer on compound interest.
8. Investing can be fun for kids too
The concept of investment can sound quite complex, and it can be difficult to know where to start – for adults as well as children! There are many resources nowadays and more accessible digital platforms to help adults and children alike get started on their investment journey. Not sure how to get started with teaching your child how to get started with investing? For a local online investment platform offering kids investments, look no further than Hatch.
For a more structured investment option, or if you don’t have the time to think about which shares to invest in, consider opening a Kiwi Wealth Managed Funds account. Managed Funds are easy to manage and simple to open to save for under 18s. If you prefer to have control, you can open a dedicated account in your name and earmark the investment for them. Or, you can open an account in their name and they’ll take control of the account once they turn 18.
Managed Funds are a great option for family members wanting to contribute to your child’s future, enabling them to deposit funds into a dedicated account rather than purchasing another toy they’ll quickly get bored of. Grandparents and family members may feel strongly about wanting to contribute to your child’s high school or university education, their first home or wedding. Learn more about setting up a Managed Fund for kids with Kiwi Wealth.
9. Get real about the cost of living and retirement
While retirement may be an abstract concept for littlies, it’s an important one to tackle as your kids get older. As soon as your child gets their first after school job, you can encourage them to open and contribute towards a KiwiSaver account. You can use your KiwiSaver contributions for your first home, so your contributions aren’t just going towards your retirement (which can seem like a very long way away for a teenager). KiwiSaver is the ultimate in long term savings and having open conversations about retirement with your teenagers can really get them thinking about what they want to achieve with their working life.
It’s useful for teenagers to have a good grasp on the cost of living too. They’ll need to understand average rent prices, the cost of groceries and utilities, transport costs and all the other expenses if they want to start living independently. Grandparents and other family members can also be useful in having these conversations and providing different perspectives on ways to save and budgeting options.
10. Help your kids avoid debt and other money traps
As parents, it’s our instinct to protect our children. The same principle applies to protecting them from getting out of control with debt by way of credit cards or loans. Educating our kids on when it makes sense to get a credit card, and when it doesn’t, can be a valuable life lesson for increasingly independent teens. Another aspect to consider is that out-of-control debt levels can affect a person’s credit score and ability to finance their future for life.
Help your young adults understand that a credit card or loan can be a useful tool to purchase a big-ticket item, but not for small and frivolous purchases. Make sure your kids know they’ll need to pay off their credit card or loan every month, and get them to talk through how they’ll make sure they can do this before signing an application form.
The concepts of ‘good debt’ and ‘bad debt’ are also important. Good debt includes a mortgage for a home or significant asset or an interest-free student loan that is helping your child prepare for their future. Bad debt could include high-interest credit cards and payday loans.
Not all debt is avoidable and you shouldn’t feel bad if you need to utilize a loan from time to time, but staying on top of debt repayments is a great way to model good money management for your kids.
Get started with Kiwi Wealth
Keen to know more about growing your wealth with Managed Funds and helping your child plan for their future, or setting up a KiwiSaver account for your kids? Get in touch with Kiwi Wealth today and start making plans for your tomorrow.