The lessons we learn about money in childhood, and the financial habits we establish early in life can have a profound impact on our financial position over a lifetime.
That’s why the conversations you have with your kids around money, and the example you set for them is so important (same applies for grandkids and other youngsters in your life).
It doesn’t matter if you’re not an expert – the principals of good money management are simple, and kids are naturally eager to learn.
Start the conversation
Once upon a time we didn’t talk to kids about money…and many other topics they were deemed too young to deal with. Thankfully, that’s changing.
In our household we’ve always talked openly with our kids (now 16 and 12) about money – what we earn, what we paid for our house, car, groceries, holidays.
We talk about our home loan, our investments and how we use credit cards. And importantly we talk about the financial decisions we have made, and why.
These conversations, and the example we set, form the foundation of our kids values around money.
Pocket money
Pocket money can be a great tool to teach kids about the value of money – especially if it’s linked to chores around the house.
Amounts and chores need to be age appropriate, and in the Nutshell house, pocket money is only paid if chores are done to an acceptable standard.
That might sound harsh (and of course, there can be flexibility) but it's about teaching kids the value of money – in its most basic form, an exchange for their service. This comes in to play when they get their first part-time job.
Savings and bank accounts
As the pocket money grows, it’s never too early to establish good money habits – traditionally, this starts with saving in a piggy bank.
Then once your kid is school age, you might consider using savings jars. In the Nutshell house, we use three jars – Spend, Save and Give. (The photo above is my DD's jars... yep, they're nothing fancy with masking tape used for the labels.)
Each week the kids have to split their pocket money across the jars (coins are handy!). They get to choose how much goes into each jar, but every jar gets something every week.
An important step with savings jars is to identify the goal. The kids choose a goal they'll work toward for the Save jar, and they choose what cause to support for the Give jar. We keep this really simple by writing it on a piece of paper that sits in the jar.
As they’ve grown, we’ve graduated to bank accounts – nowadays many savings accounts allow you to allocate dollars to specific goals, and track your progress. They even pay interest, which is an important money lesson in itself.
Part-time job
Kids lead busy lives, with school, study, sports and social (media) lives. Fitting in an after-school job can be hard.
We’ve taken the view that working and earning is as important to an adolescent’s development as all their other extra-curricular activities. It gives them real world experience, rewards them financially, and teaches them about independence and responsibility.
Some teenagers are super keen to get a job and start earning as soon as possible, and some aren’t. If you want your kid to get a job, try an incentive to give them the extra motivation they need – this could include the loosening of social media restrictions (‘if you’re mature enough to get a job, you’re mature enough to have more social media’) or other freedoms. For the ultimate motivation, stop paying for some of their stuff.
Responsibility and freedom
As kids grow into adolescence, they naturally gain greater independence and take on more responsibility. So it's an ideal time for them to start paying for some of their own personal expenses. With that responsibility it's only natural, and fair, that it comes with some freedom – them having greater say in what they want.
What item do kids value above all else? No contest – their phone. Which makes it the perfect place for a valuable money lesson.
Rather than buying your kid a new mobile phone, give them a (modest) budget to choose their own phone.
When our kids were confronted with this deal, our daughter opted for a brand-new iPhone (and had to tip in her own savings to cover the cost), while our son chose a much cheaper refurbished phone.
Both options were good – the important thing is that they understood the financial trade-off and made an informed decision (we assisted them do some research and buy the refurbished from a reliable source).
Having teenagers pay for their own mobile plan is another great way to learn the value of money – and is a great motivator to start earning with a part-time job.
The exercise of researching options, comparing benefits and costs (with parental guidance) is extremely valuable in a world where so many services come with a monthly subscription.
What kind of role model on money are you?
Regardless of what lessons you try to teach your kids about money, the habits they are most likely to adopt come from your actions and not your words.
So keeping your financial house in order is not only great for you, but will help set the next generation on a path to financial security.
If you want to work with a money coach, to get financially fit, schedule a complimentary call using the link below – you can tell me what you want to achieve from coaching, and we can discuss if Nutshell Money is the right fit for you.