Make Your Kid A Money Genius (Even If You’re Not)
I am a firm believer that as a society we do not put enough emphasis on teaching our children about money. Towards the end of my high school I read Robert Kiyosaki’s book Rich Dad Poor Dad which for me then other than doing fake trading on the stock market in mathematics at school was the first insight into understanding how money can work. I recently listened to an interview by the author Beth Kobliner of “Make Your Kid A Money Genius (Even If You’re Not)” She talked about some basic tips that we can pass on to our children. I enjoyed her explanations in lamens terms and I wanted to share them with you.
What I found interesting was children as young as the age of 3 already have a basic understanding around money habits. By this age they can understand value,exchange, and how to make choices about money.
Everyone has some financial baggage and as parents it is important to go through basic financial principles and money basics with our children. From Age 3 start talking about “I have a job that helps us pay for food and petrol etc. We don’t need to talk about how much we make specifically or how much super we have, or how Uncle Joe is tight and Aunty Joanne will just spend money on anything!
It is important to not lie to kids, if you are in a shop, do not say I have no money when they are demanding something, to then stop on the way home and buy petrol. Explain this is not what we came into the shop to buy today.
Frequently these days kids see us wiping cards more so than using cash. Use cash intentionally at times. Explain credit cards are like a loan, getting free money with interest. Explain it can be like paying $800 for a TV but paying the minimum repayments you’ll end up paying $1,100 for that product.
Unfortunately unlike when we were children savings accounts that existed are no longer around. As a child I had a savings passbook which I would go into the bank with my savings and the Teller would actually stamp your book although this isn’t available these days recommended even putting $100 a year into savings for the child. Another recommendation Beth Kobliner suggested to help them understand trading is to look at exchange traded funds or ETS which can be trading with as little as $100. This way they are still getting knowledge around trading actually using money. I remember when we did dummy trading in Maths I didn’t care when the Boardshorts Company I chose to invest in tanked as there was no ‘real’ financial interest.
Another part of the interview that I found interesting was around kids getting an allowance. There are over 2 dozen studies published on allowances and the consensus was it does not change their behavior. It was recommended that kids are not paid for chores that would be seen to be contributing around the house as a member of the family. However paying an allowance for jobs that would be considered going above and beyond for something that you would outsource perhaps to someone not in the family. An example was sorting large amounts of photos into files etc.
Be consistent with your children and money. If you tell them they will pay for that concert and then have them pulling heartstrings when they not saved saying “but all the other kids are going”. On that same note be realistic don’t expect them to buy presents for all their friends birthdays, buy phone credit and save for the concert.
If they loan money from you while you are out as a family and say they will pay you back, make them stay true to their word.
As they’re slightly older it is considered good to explain how insurance protects them from huge unexpected costs. At the same time go over how extended warranties on small products like appliances need to be weighed up whether they will actually benefit. Perhaps the product may be replaced before the extended warranty comes into play.
Before they enter the workforce explaining how some companies offer to match super contributions is like getting money for free and should be taken seriously. Research showed that male teens get talked to about investing & saving and girls get teased about buying make-up or clothes. The author recommended treating both sexes equally when it comes to educating on saving and money habits.