There are some topics of conversation that most people generally avoid so they don’t change the vibe of the room. It might be politics, religion or hamming on about your love of sausages while attending a conference for vegans. For lots of New Zealand families, we don’t talk about our income, or our loans, or our debt because we were brought up not to talk about it.
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You don’t often sit at the dinner table with your in-laws and ask them how much of their wealth you stand to inherit and how much longer they expect to live. It’s too awkward – and inappropriate. A lot of people who struggle financially never got the opportunity to talk about money. Our children need a safe place to discuss and learn about all of those sensitive topics. Especially if it’s about something as important as money.
So how do you talk about finances with children?
There are lots of ways you could talk about it.
You could go on a 20 minute back-in-my-day monologue about how wine gums were 5c a pack, you’d never pay more than a tuppence for an ice block and how it only took you six months to save up for your first home deposit ($150). That isn’t always the best way but talking about money is something that you shouldn’t be afraid of. You just have to introduce your kids to the basics of how to manage money. This will prepare them for a future of financial success.
A lot of adults struggle to fully understand how money works. Some of us just know that we have bills to pay and buying a coffee before pay day is a fun game of ‘I wonder if this eftpos machine is going to ask me to contact my bank?’. To make it simple for children to understand, they need to actually see the money. In a world of online banking, online shopping and in-game purchases, the real value of money can be confusing. So before you begin to explain why 2018 hasn’t been a good year for your cryptocurrency portfolio, make it really basic by teaching children with cold, hard cash.
Perhaps your family could engage in the time-honoured tradition of domestic conflict known as playing Monopoly. That can actually be a good way to practice saving and strategic spending but it’s also a good way to practice accusing people of cheating and throwing a small metal top hat across the room. We have an alternative idea.
One simple idea is to use three jars to divide up your child’s money. If your child doesn’t have any money then you’ll need to work out a way for them to earn some.
You will need three jars. Label them ‘Spend’, ‘Save’ and ‘Give’. Every single time your child gets some money, turn it into cash and divide it into the three jars. A popular way to spread the cash is 80 percent in spending, 10 percent in saving and 10 percent in giving. Every jar can start good conversations on how to use money now and in the future. We need to teach our kids the joy of all three! It’s fun to spend money on stuff. It’s fun to look at how much you’ve saved. It’s fun to give stuff to people.
The giving jar
The ‘giving’ jar will teach them about the joy of giving to others. Your child will be stoked to buy a birthday gift for a friend with their own money. Ask them about which charity they would like to support and do some research on where the money goes when you donate. It could be sponsoring a child, saving the turtles or investing into their friends’ recycled-jandal wind chime business that needs a financial injection to survive because it’s a terrible idea.
The savings jar
The second jar will teach your child about delayed gratification. To prepare your child for financial literacy, they need to understand the value in saving. Having real money accumulate in the ‘savings’ jar gives children a tangible grasp on the benefits of saving. You can talk to them about what they’re saving up for. You could talk about the financial goal that they are working towards and calculate how long it will take to save for that new bike or phone or shoes.
The spending jar
The last jar is ‘spending’ and it can start good conversations about the real cost of things. You could choose to be highly directive with how they spend this money but one of the fun things about this jar is that your child gets to choose how they spend it however they like.
Then you can talk about what they chose to spend it on. What was your favourite thing you bought this week? What was the cheapest thing you bought? Was it really worth buying $10 worth of Bunnings sausages? (Let’s be honest – the only regret is not buying $20 worth). Maybe together you could even draft up a budget with your child so they know exactly how far their money can stretch when you’re being deliberate about it.
Have fun with this idea because if you can lay this foundation with a small amount when they are young, it will continue as a really helpful platform right throughout the years.
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