You want to provide for your children, protect them, and give them all the luxuries you can afford. But eventually, they will need to understand that all that costs money and that money does not grow on trees. It may be a cliché, but there is truth to it. Eventually, we all have to face the fact that Santa is not real and that someone is going to have to pay for that.
So, at some point, you will have to start teaching your kids about money and its value; otherwise, you’ll risk their financial stability when they go out on their own.
“I’m a professional financial consultant and even I have trouble sometimes when deciding when and how to talk to my boys about money,” admits Richard Cayne of Meyer International. “I know I can’t just let them enjoy their toys and vacations forever, but I worry that I’ll just sound like I’m lecturing. And we all know how ineffective that can be.”
Richard realises that trying to explain compound interest to a five-year old child is probably a futile effort. But there are steps every parent can take during a child’s development to lay the foundation for a sound understanding of money and basic finance.
Piggy banks are always a good start. This is a tried and true tool that parents have used for generations. Piggy banks allow kids to handle money and see how patient saving can accumulate into bigger amounts. That may be good for very young children who are just starting to grasp the concept of money (not just things to try and swallow) and volumes (collecting coins will mean having more coins).
Saving jars can teach buying goals. As they grow older and can understand more complex ideas, you can move onto saving jars. By teaching them to set goals and pre-plan their saving, children can learn how to prioritise their goals and how to strategize their spending in the short and long term.
Discussing your spending can be more effective than lecturing. Instead of waiting until your child asks for a Ferrari as his or her first car, use your shopping trips to break down buying decisions with your older children. You may want to start with simple comparison shopping for fruits and vegetables before you move on to interest only loans for your next home purchase. But by discussing the various options and how you make your choices, you can help shape your child’s financial habits. And you may discover a few things about your own spending along the way!
There are many other techniques and strategies you can employ that hopefully will not cause any family rifts and may actually be fun. These can sometimes be difficult discussions, but you probably should try not to avoid having them.
And there is help. Some government agencies have websites that offer assistance and advice:
Or, for a more personal conversation, contact Richard Cayne at Meyer International.