Some topics of conversation have the potential to make people feel uncomfortable, so many of us tend to avoid them. Topics like politics, religion or hamming on about your love of sausages at a dinner party hosted by vegans. For lots of New Zealand families, we don’t talk about our income, our loans or our debt because we were brought up not to talk about money.
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. It’s obviously too awkward – and inappropriate. The problem is, however, a lot of people who struggle financially as adults never got the opportunity to talk about money (appropriately or otherwise) when they were growing up. Our children need a safe place to discuss and learn about sensitive topics – especially topics as important as financial literacy.
So how do you talk about finances with children?
There are lots of ways you could talk about it. For example, you could launch into 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 or how it only took you six months to save up for your first home deposit ($150).
Truth be told, wine gum inflation is more or less irrelevant at this point. A more constructive goal is to introduce kids to the basics of managing money.
A lot of adults struggle to fully understand how money works. Some of us only know that we have bills to pay and that buying a coffee just before pay day can be a exciting game of “I wonder if this eftpos machine is going to ask me to contact my bank?”. To help our kids understand money, they need to actually see it. 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 2020 wasn’t 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. This can actually be a good way to practise saving and strategic spending, but it’s also a good way to practise accusing people of cheating and throwing a small metal top hat across the room. We have an alternative idea.
A simple teaching strategy, and a great talking point, is to use three jars to divide up your child’s money. (Yes, they will need their own cash flow for this learning experience to work best.)
Label those three jars ‘Spend’, ‘Save’ and ‘Give’. Every time your child gets some money (pocket money, birthday money or entrepreneurial earnings from their lemonade stall), turn it into cash so they can divide it between 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.
Keep in mind that 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. And it’s fun to give money or things away to other people.
The giving jar
The giving jar will teach children 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 friend’s recycled-jandal wind chime business that needs a financial injection to survive because it’s a terrible idea.
The savings jar
The saving jar has the potential to teach our kids about delayed gratification. To prepare children for a financially smart life, they need to understand the value in saving. Seeing real money accumulate in the savings jar gives children a tangible grasp on both the benefits and the satisfaction of saving money. Talk to your kids about what they’re saving up for. Talk to them about financial goals and help them calculate how long it will take to save for that new bike, phone or pair of shoes.
The spending jar
The last jar is for spending and this one can start some great conversations about the real costs of real-life things. While you can be highly directive with how your kids spend this money, one of the fun things about this jar is letting your child practise making their own choices.
There is potential for great learning here, especially if we allow children to make some mistakes. They may really, really, really want to spend $10 on a bubble popper poppit fidget toy thingy. If they have the funds available, they’re free to make this purchasing decision. They may later feel that a silicone bubble popper poppet fidget toy thingy wasn’t really worth ten bucks, but how good to learn this lesson with a tenner, rather than later in life with $1000? (We’re not saying anyone would pay $1000 for a bubble popper, but you get the round-about point.)
That said, while it’s their money, they are your children. If you don’t think that your child should empty their spending jar at the dairy and walk out with 10 litres of Fanta, you can say so.
Talk to your child about what they’ve spent their money on recently, and what they’re choosing to spend it on in future. Ask questions like:
What’s your favourite thing that you’ve bought recently?
What was the cheapest thing you bought?
What was the most expensive?
– Was it worth it? Would you buy it again?
What was your best bargain?
What was the biggest rip-off?
Maybe together you could even draft up a budget with your child so they can begin to see how far their money can stretch when they’re being intentional about saving and spending.
Have fun with the three jars concept and see how it works at your place. It’s a simple tool, but it has potential to provide kids with the foundation for developing their financial literacy. Not only does it offer insights into the value of money, but there is also great learning here around decision-making, delayed gratification, sharing and stewardship. Not to mention the enjoyment money can bring. Even if that is with your newly purchased rubber poppit thingy – a purchase which is now generously lining the pockets of some entrepreneurial genius who recognised the potential of taking bubble wrap to the next level of consumerism. Actually, that’s another deep conversation right there.
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