Organised Green Kiwi Home: Good with money? Money skills for kids

A friend recently told me of her frustration that her parents had not prepared her for handing her money as an adult. “They figured I already knew about money so they thought they were doing the right thing just buying me everything”. From her perspective, she was set up for failure as she never learned how to manage money, and she wishes her parents had taken a different approach. I grew up as the child of a beneficiary, who was very good at making the benefit stretch so we usually had what we needed. There were definitely tough times, and I missed out compared to my peers, however I learned to work for what I wanted, and a lot about managing money! I want my kids to understand the value of money, the importance of working, earning and saving, and importantly not to take it for granted. I want them to be ‘good with money’.

I don’t believe we do our kids any favours by taking the approach of making up for what we missed out on, or by trying to keep up with others. I love the saying that we should indulge our kids with our time, but not with things/money. Is it a vicious circle that we are short of time so buy happiness, but are short of time because we need the money to buy things to make us feel happier? Affluenza? So, how do we raise kids who will be good with money? Here are some ideas:

Be generous with your time. Save gifts for birthdays and Christmas. You might be in the position that you can afford to buy your child toys and other things they want any time. However is getting what they want whenever they want it a reasonable expectation for a child to have? How will than pan out when they are financially independent? Or will it mean that they won’t be financially independent (and/or in debt) because they cannot wait to have whatever it is they desire this week? When people reminisce about happy childhood memories it usually involves special time spent together rather than consumption.
Encourage them to save for the things they want. My daughter loves ‘My Little Pony’ and desperately wanted more of the toys. She didn’t want to wait until her birthday or Christmas, so she decided to save for what she wanted.
Teach them the value of shopping round and buying second hand. We compared the prices of new toys and ones on Trade Me. She quickly decided for herself that she would get much more for her money buying second hand. She has also become adept at rummaging in op shops to find treasures to add to her herd.
Encourage them to earn. Develop a family approach to pocket money that you can all agree to. Some families have chart systems where pocket money is paid according to chores completed. We split ours into ‘save’ & ‘fun’, with ‘save’ going into the child’s bank account and ‘fun’ into their wallets. Other families use the categories ‘save’, ‘spend’ and ‘share’. ‘Share’ is for gifts and charity giving.
Teach them the value of money by using comparisons. e.g. “that toy costs the same as the groceries to feed our family for a week”, or “you can get three of these for the price of one of those”.
Be a role model. Talk about your money choices: things you want but don’t get because you have other priorities; things you are saving for; how you save for family holidays; why you shop around to save money; why you choose to shop at the supermarket rather than the dairy; how much it costs to fill up the car. Of course you are not trying to create stress or guilt for your child, but instead trying to help them see you making responsible choices.
Give them the opportunity to manage a budget. It could be as simple as the budget for a day out at the school fair; or more responsibility with managing their clothing budget for a year. A friend with a mixture of primary, intermediate and secondary aged kids gave them each their clothing budget for the year to manage. The fashion conscious teens and tweens soon learned that if they blew the majority of their budget on designer jeans they would be shopping at the op shop for the rest of the year. The primary aged kid spent the minimum in budget shops and sales and saved the rest to use as spending money on the family’s holiday! The key to giving kids a budget to manage is the lesson that ‘when it is gone it is gone’, so no bailing them out (unless you want to teach them about interest and debt!).