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5 Ways to help your children become good with money

August 29, 2019


Written by Contributor

Children are never too young to learn about money – here’s how to get them started. 

Super investor Warren Buffet started his career at the age of six – by buying a six-pack of Coke for 25 cents and selling each can for five cents. 

Years later, the billionaire was clear on what he thought was the biggest mistake parents make when teaching their kids about money. 

“Sometimes parents wait until their kids are in their teens before they start talking about managing money, when they could be starting when their kids are in preschool.”

New Zealand’s Commission for Financial Capability agrees we should start talking to young people about money sooner. 

The Commission says today’s students have greater access to credit than any other generation, and risk being sucked into cycles of bad debt.

The earlier they start learning how to be good with money, says the Commission, the better. 

Try these 5 ways to teach your children about money:

Make it personal 

Money habits can be formed as early as the age of seven, according to the University of Cambridge in the UK. 

The research found that young children learn best about money when they have “personal economic experiences”. 

In other words, kids are more likely to develop good financial habits if they have parents or grandparents who give them real-life practice at using money wisely.

Open a managed fund account

Opening a KiwiSaver account is one way to help your child save for a first home or retirement. Managed funds can help you save for other goals your children may have as they grow up, from studying to travel. 

Kiwi Wealth Managed Funds are among the most accessible actively managed funds on the market. You can start investing in your child’s future for as little as $500, and make regular investments from just $50. 

Together you can check the progress of their managed fund account each month, so they can keep track of how their investment changes over time.

Explain saving vs investing

Even some adults struggle to understand the difference between saving and investing. 

So here’s a simple way to explain it to children: 

  • saving is putting your money away to spend later
  • investing is putting your money to work, with the potential to make even more money for you 

Following the progress of investments like a managed fund over time can help kids understand the value of investing over the long term. 

You can learn more about saving vs investing in our jargon-busting Investor 101 resource centre. 

Keep talking

It’s important to keep talking to your kids about spending, saving, investing and donating money. Keep the conversations age-appropriate, and use real-life examples.

For example, if you have a managed fund or a similar investment in your child’s name, use market dips as an opportunity to talk about risk and time horizon.

A time horizon is how long you expect to hold on to an investment before cashing it in. Knowing your time horizon can help you decide what kind of investments to make and what level of risk to take.

Enjoy the rewards

Showing your children, the rewards of investing is the most powerful way to teach them the value of being money-savvy. And that’s where managed funds really have the advantage.

They’re flexible – withdrawals can be made when needed, and without any penalties

If you’ve set up a managed funds account on behalf of your children, you could allow them to make a withdrawal to help pay for something that’s meaningful to them. 

You could help them buy their first car, pay off their student loan, take a gap year, break into the property market or start their own business – the sky’s the limit.

For more useful money tips to pass on to your children, take a look at our jargon-free financial wellness guide.

Tags: KiwiSaver, Investment Basics, Financial Wellness, Managed Funds

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