Do your kids think money grows on trees? Here are some strategies for teaching them to be money-savvy.
When it comes to teaching kids about managing their money, piggy banks are cute but useless. Young ones drop their money in to that black hole of a slot, don’t see their savings growing, and may even have to break it open before they can figure out how much they’ve put away.
Admittedly the slotted pigs are everywhere, but especially when you get towards the tween and teen years, those banks are better off left as some last-century artefact.
So what to do for your super-savvy kids? Here are some tips to encourage financial capability:
Coins are still gold. The kids see us magically swipe everywhere these days, so money looks like it’s on tap with every pin number we key in. By starting purposefully with coins, our little ones get a tangible experience of cash. Who can stack a digit?
Jar them to attention. The alternative to the piggies are clear jam jars, where the kids can see how much they’ve got. With more than one jar, they can give their money different jobs to do (with help from you, of course). Besides the traditional spending, saving, and giving jars, add an entrepreneurial, long-term “growing” fund, and there’ll always be money for jam.
When it’s gone, it’s gone. Our brains process cash differently than digital currency on a card. It’s important for kids to learn that when we hand it over for sweets, it’s really gone. When we buy something lasting instead, like Lego, that “wealth” sticks around.
Afford everything. Kids learn from our attitudes towards money and the choices we make with it. And, of course, they have many (expensive) ideas of their own! Instead of shutting them down with a “We can’t afford that” ? which leads to feeling deprived ? it helps to explain our choices with a “We’ve got much better things to buy” instead. The reality is that we can afford many things over our lifetimes, but we make other choices along the way as to what’s most important to us. We’re in control.
Delay gratification. Studies show that anything we can do to teach kids patience when it comes to spending will help them overcome impulse buys in the long run. Setting up savings goals and working towards them together can help, as long as they’re not too far off to discourage. Celebrate the anticipation as you count down, too!
Dial up the gratitude. You may be grateful to hear that studies also show that a sense of gratitude helps us become better savers and more money savvy. Making time to ask “What are we thankful for today?” is time well invested.
Go digital. There comes a time when coins and bills in jars don’t do the trick anymore. In fact, there even might be a time where cryptocurrencies become the norm. If your kids are interested then they can read all about these Bitcoin Trader Erfahrungen hier to get them started. But the good news is that, with kids on screens these days, those four jars can easily transition online into separate accounts, and the kids can see their different balances growing on a bank app just as well.
Keep them interested. Keeping pocket money
amounts low and paying the kids 10% interest compounding
each month shows them how it can grow ? and grow quickly. The power of compound interest makes it grow like a tree when invested.
Let them invoice you. Towards the tween and teen years, there may come a time when pocket money is no longer enough. To avoid frustration, transition your kids to paid work by identifying voluntary jobs around the house that they can do to earn more. Have them invoice you once a week, and many money lessons will come with it.
Hand over responsibility. What we all want for our kids is for them to be successful when they manage their own money in the future. So every expense that they have as kids ? whether bus fare or a mobile top-up ? is an opportunity to help them learn how to take care of business. The sooner we offload the responsibility, the better.
Tom Hartmann is personal finance editor at the Commission for Financial Capability and proud father of Eva (13), Theo (10) and Isaac (8). For more tools and guides, check out sorted.org.nz.