This always seems to be a topic that parents and grandparents tell us is useful. It can be difficult finding the time and the right way to go about having the money conversation with children where they will actually listen and take note, especially if we are talking with teenagers. Start early and make the discussions open, fun and encourage questions.
- Encourage your children to work for their pocket money. When they are old enough, possibly around fourteen, encourage them to work for someone other than you. This gives them a taste of the real world.
- Teach your kids to budget. The Sorted website is very useful for this – learning about income, expenses and creating surplus income from an early age will stand them in good stead for their future.
- If your children like to spend, say on clothes and personal items – things they want rather than need, consider giving them an allowance each month so that pretty much all their ‘wants’ can come from this. Once it’s gone, it’s gone. Things that are needed, such as school uniforms, shoes, books and trips can of course be bought by parents, but treats, can be funded from the child’s own allowance.
- Consider setting up a ‘3 pots of money’ system with their earnings or pocket money. One pot is for their own saving, another is for their own spending and the third could be a ‘family treat’ pot, where everyone contributes and can benefit from a family day out, special meal or any treat which have been saved for. Encourage your children to save at least 10% of everything they earn, more if possible whilst they are young and living at home.
- Inform your children that if they wish to go to University or experience a student exchange, you will expect some effort from them. This could mean that they save a portion of their money towards this or being clear that that they are expected to work part time while they study. Let’s face it, many of us parents study whilst working full time, running a business and home life.
- Sign your children up for KiwiSaver when they start work and encourage them to contribute to this. This can be done via their employer and they can manually contribute. This is especially important when they reach 18 as they then start to receive the government tax credit which is $521 p.a. for every $1,042 p.a. contributed.
- Don’t’ buy your children designer labels or treats to show them you love them. Spend quality time with them instead and start teaching them about the value of money in conversations. Tell them how mortgages and loans work, what interest rates for savings and debt mean, how debit and credit cards work, what bills are part of your household, the cost of utilities and a shopping basket of food. Talk about how many hours are needed to be worked at $x per hour to pay for those things. Teach them to sew or look for bargains through ‘op shopping’.
- Don’t lend your kids money without a plan for repayment. All you are doing is teaching them how to accrue debt. Ideally, they need to have earned and saved the money before spending it however, sometimes they need help with buying their first car. Agree a monthly repayment plan and stick to it. Ensure they buy the fuel, pay for the insurance and their AA cover too. It will mean more to them if they’ve used their own hard earned money.
- When your kids start working fulltime and still live at home, charge them board. It doesn’t have to be a lot but it does need to be something. They will be paying for rent or mortgage or at some stage when they move out, unless you still really want them living at home at thirty?!!
- Encourage your children to purchase household items for when they are ready to leave the nest.
Finally, one of the best investments you could make in your child’s life when they get to the stage of needing financial support, is to buy them a few hours of time with an expert financial planner. Getting them on the right track with their mindset around money early in life will empower them greatly as they get older.
By Charlene Overell