By Katie Smallwood
Chartered Accountant, mum of 2 kids
Raising money smart children
My daughter has developed a new, strong and meaningful relationship over the last year. It is a relationship that I love as an important milestone but also loath because another childhood milestone has been reached. I am talking, of course, about the tooth fairy. This little mite slides in and steel my daughter’s teeth and I am expected to fork over money each time. That being said I have each tooth gone so far in a little pouch. I still haven’t decided if that’s creepy or not.
Kids and money
When she lost her first tooth my daughter immediately asked what she can buy for the $1 she received. She definitely had visions of dolls, toys and shoes dancing around her head. I tried to explain to her that you can only get those things if you save your money up. Not entirely convinced, she went upstairs and, judging by what happened next, started plotting. A week later we were at the Build-A-Bear shop and she suddenly had $40 for a new bear. Apparently that was where all the loose change around the house had gone for that whole past year! That is scary levels of forethought. (Don’t worry. It didn’t last. Each dollar she received beyond that went straight to the school canteen.)
But this has made me start to consider how to teach the kids about money, and how to afford the things they want without theft! So here are my top tips for raising ‘money smart’ children.
Just like your kids are watching your exercise habits, they also pick up on your financial habits. One problem. In today’s technologically awesome times it can be harder for children to learn the value of money because money is virtually invisible! They don’t see bills coming in, cheques being written and money being exchanged for goods. Remember those days? This money being invisible can also sometimes make it feel like it is unlimited even to us…imagine what the kids are thinking!
So how do you get around this?
Go old school!
Where possible start to use cash again, especially where it is something for your child. For instance if she wants a finger bun (as an example just off the top of my head, not case specific at all) then instead of just tapping your card, or heaven forbid your phone, have her hand over the $1.50.
Although my daughter got to her Build-A-Bear by nefarious means at least she had a goal. Not only does having goals help teach your child the value of money, achieving the goal will hopefully encourage them to repeat the experience if it is successful. It helps to defeat the ultimate enemy of budgeting – impulse shopping.
You can also encourage your child to work towards family goals. Do your kids desperately want a puppy? Why not set up a savings jar to help reach the exorbitant cost of the adorable little fluff bucket? Your child doesn’t necessarily have to hand over their pocket money but could do chores around the house to earn money, and this money can go into the jar. Not only will they feel immensely satisfied when the goal is reached, but they may also appreciate the puppy more when it is chewing its way through their dolls.
Speaking of Pocket Money
I am really against just handing over a set amount of pocket money every week. As adults do we just receive money for nothing? However I also don’t think kids necessarily have to work around the house to earn their money – although this can be a great way of earning extra money.
I have always liked how my parents did pocket money. It was a good citizenship bond. It didn’t mean that I had to be a perfect princess each week, it just meant that if I swore or was a total little hideous monster to my parents or at school I was docked some money from the weekly takings. Then if I needed to earn more money I could do chores. When I wanted a bike I actually cleaned my room for 6 months to earn that cash! Hasn’t happened since, but that’s my problem really.
What I really liked about it was that my parents were a part of it too. If I caught my mum swearing (and I did…a lot…where did you think I learned it from?) I got additional money for the week.
Once they start receiving the money though, depending on how much they receive and how old they are, I suggest that they should then pay for most additional expenses they want to incur. It’s up to you what this can include but for me it includes things like a lolly splurge at the movies. Again this teaches them the balance between goals and the sacrifices we must make to get there.
Make Sacrifices – and I don’t just mean the kids!
We go to the Easter show every year as a time honoured tradition. But since I was young I had to do the catalogue shopping to decide which show bags I could afford. Granted now its which ‘bag’ (singular) but still, the lesson is there. You can’t have everything, as much as it would be fun to get it all.
It is also important that your kids see you making sacrifices as well. Be open with your children about where you are spending your money. If you are looking at a pair of to-die-for shoes but know you must walk away, tell your children what you are doing and why.
As always it is a great idea to talk to your friendly neighbourhood accountant, and in deed other parents, about your children and money. There are many ways to deal with the topic and different methods will work for different families.