Author Katrina Shanks, CEO Financial Advice NZ Article originally published on Stuff.co.nz.
There are many stories about people who gain an early knowledge of money and how it works, and then put that to great use to give them a very comfortable living from an early age and a very early retirement, but one caught my eye recently.
It was about a US entrepreneur by the name of Allan Hu, who started his first business at the age of just 17. And, so successful were a series of lucrative ventures, investments, and strategic planning he undertook that he was able to retire just 10 years later – aged 27.
Where he invested is irrelevant. He clearly thought outside the box and was keen to take a few risks. But he first had to learn the value of money and how to make it work for him. As he says: “It’s all about how we look at money in the long term. Money isn’t supposed to meet our immediate needs. It should be put to work to meet our long-term needs as well”.
As I said, his story isn’t unique but it’s certainly at the upper end of remarkable, starting as it did while he was still at school.
This prompted me to have a look at what’s being taught on financial literacy in schools to prepare students for a life when they will earn and spend their own money. There is quite a lot going on.
Most school financial literacy resources are online tools, and they vary in content, length and effectiveness. They are both interactive and passive. Interestingly, many are sponsored by banks or directly provided by them. Here are just a few examples of what’s on offer:
- Sorted in Schools provides financial resources and discussion ideas for secondary schools online.
- Banqer Primary provides resources for years 2-8, and Banqer High for years 7 and up.
- GetWise facilitators hold school workshops for years 1 to 8 on money management.
- Manage Your Money is a workshop scheme for high schools, and their Zombie Cash-tastrophe game is for ages 12 and up.
- Bamzonia offers game-based learning for ages 5 to 13.
- MoneyTime is a financial education game for children aged 10-14.
They all offer resources for children, teachers and home-schoolers. Some are totally free, while others have a portion of their programmes subject to a small fee.
Unfortunately, financial literacy is not part of the national school curriculum and few schools make it compulsory. A lot of schools use these resources, but a lot don’t. Which is unfortunate because we do need to be doing more.
A survey of 1000 young people who had either just left school or were about to found 35% learned “almost nothing” about money at school, while 38% say they learned “some” things about money, but just 27% learned “a lot” about it.
Another one showed just 8% of 15-year-olds were in schools where financial education is compulsory.
In the absence of anything structured in schools, what other options are there?
Well, what about parents?
Actually, whether they know it or not, parents play a very important part in how children treat money into later life. It’s widely acknowledged our money experiences are largely shaped by the way we are brought up – what our parents did and what they taught us.
If parents have good habits, then the children often will, too, because they pick things up by watching and listening. Likewise, if they have bad habits, so may the children. Passive learning is one thing, but parents can be very proactive, too. The big lessons are showing them the value of money, how to save and budget, how to work hard, and how credit works.
Here are some tips parents can follow to help give their children the best money start possible:
Grocery shopping: This can be a fun way of showing spending in action and you can involve them from an early age. Show them what you can buy and what you have to leave out, and get them to look for cheaper or sale options.
Budgeting: Involve them in ways to help save money. Ask them if they can find a cheaper alternative. If it’s food, they may be able to suggest a cheaper meal option. Or if they want that new computer game, they have to either save for it or reduce spending somewhere else. That teaches them to buy what they need not what they want.
Sales: Get them to look for items with sales tags on.
Credit: Explain how it works, that it’s not free and will have to be paid back.
Saving: Saving a little in a bank account on a regular basis will add up to big things over time. Explain how compound interest works. There are some very funky virtual savings accounts for children where they can see their money grow on an app. Not picking a winner, but ASB Clever Kash is worth a look.
Pocket money: This can be a tangible way for children to learn how cash works and how they can save up for themselves. And they can touch it, unlike an Eftpos or credit card. For the really young ones, a money box often works. If they earn it through doing small jobs around the house, it shows them the value of work and how they can exchange their time for money.
So, at what age should parents be doing this? Well, anytime is good, but like saving, the earlier they value money, the better the rewards later.
In our house our children were a mix of savers and spenders. The consistent message we applied was it’s important to have some savings and not spend all your money – and it’s better to save for quality than continually purchase cheaper items you don’t really need.
In the words of my financial adviser – have the conversations when they are young, show good financial behaviours yourself, and display how you have more life choices by having more control of your money.