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How to talk about: Dollars and Sense
There are some topics of conversation that people generally avoid so they don’t change the vibe of the room. It might be politics, religion or hamming on about your love of sausages while attending a conference for vegans. For lots of New Zealand families, we don’t talk about our incomes or our loans or our debts because we were brought up not to talk about it.
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 and how much longer they expect to live. It’s too awkward – and inappropriate. A lot of people who struggle financially have never had the opportunity to talk about money. Our children need a safe place to discuss and learn about all of these sensitive topics. Especially if it’s about something as important as money.
So how do you talk about finances with children?
There are lots of ways you could talk about it. You just have to introduce your child to the basics of how to manage money. This will prepare them for a future of financial success. You could launch into a 20-minute back-in-my-day monologue about how wine gums were five cents a pack, how you’d never pay more than a tuppence for an ice block, and how it only took you six months to save up for your first home deposit ($150). This isn’t always the best way, but talking about money is something that you shouldn’t be afraid of. You just have to introduce your child to the basics of how to manage money. This will prepare them for a future of financial success.
A lot of adults struggle to fully understand how money works. Some of us just know that we have bills to pay and buying a coffee before pay day is a fun game of ‘I wonder if this eftpos machine is going to ask me to contact my bank?’. To make it simple for children to understand, they need to actually see the money. 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 2019 hasn’t been a good year for your cryptocurrency portfolio, make it really basic by teaching your child with cold, hard cash.
Perhaps your family could engage in the time honoured tradition of domestic conflict known as playing Monopoly. It 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.
If this isn’t for you, we have an alternative idea...
Three jars One simple idea is to use three jars to divide up your child’s money. If your child doesn’t have any money then you’ll need to work out a way for them to earn some. Every jar can start a good conversation on how to use money now and in the future.
You will need three jars. Label them, ‘Give’, ‘Save’ and ‘Spend’. Every single time your child gets some money, turn it into cash and divide it into the three jars. A popular way to spread the cash is 10 percent in Give, 10 percent in Save and 80 percent in Spend. Every jar can start a good conversation on how to use money now and in the future. We need to teach our kids the joy of all three! It’s fun to give stuff to people.
It’s fun to look at how much you’ve saved. It’s fun to spend money on stuff.
The Give Jar
The Give jar will teach your child about the joy of giving to others. They 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.
Find information on registered charities using the website below. www.register.charities.govt.nz/CharitiesRegister/Search
The Save Jar
To prepare your child for financial literacy, they need to understand the value of saving.
The Save jar will teach your child about delayed gratification. To prepare your child for financial literacy, they need to understand the value of saving.
Having real money accumulate in the Save jar gives children a tangible grasp of the benefits of saving. You can talk to them about what they’re saving up for. You could talk about the financial goal that they are working towards and calculate how long it will take to save for that new bike or phone or shoes.
The Spend Jar
The Spend jar is ‘spending’ can start good conversations about the real cost of things. You could choose to be highly directive with how your child spends this money, but one of the fun things about this jar is that your child gets to choose how they spend it however they like.
Then you can talk about what they can choose to spend it on. What was the favourite thing you bought this week? What was the cheapest thing you bought? Was it really worth buying $10 worth of Bunnings sausages? (Let’s be honest – the only regret is not buying $20 worth.) Maybe together you could even draft up a budget with your child so your child knows exactly how far their money can stretch when they’re being deliberate about it.
Now that you know how to create the Spend, Save, Share Jars system, you’re well on your way to teaching your kids money skills. Skills that could make all the difference to their lives. Have fun with this idea, because if you can lay this foundation with a small amount when they are young, it will continue as a really helpful platform right throughout the years.
REAL-LIFE MONEY LESSON:
Start Investing as Soon as Possible
‘Pay it forward’, but don’t expect anything in return.
Plan for the unexpected and always have a rainy day fund.
Don’t put all your eggs in one basket, diversify your Assets.
Find information on registered charities using the website www.register.charities.govt.nz/CharitiesRegister/Search