Parents should take the time to get their kids engaged in the benefits of investing and looking after themselves financially, because it’s everyone for themselves when it comes to building a future.
Remember back in the day, when a kid would head off to primary school and the bank would visit the school to “educate” the students on the importance of putting their pocket money in the bank?
Whose benefit was that really for? Sure, you learnt how to save, but you were also being trained to fall into line and get ready for a life of paying account fees. Banks were able to benefit by landing lifetime customers from an early age.
And while those days might have changed, there are still spruikers and scammers wanting to get their hands on kids’ pocket money at an early age.
But you might not want your kids to be part of the matrix. Instead, you might like to teach them to live their lives on their own terms and create financial freedom (hopefully, just like you already have).
Modern times are challenging
In the past, you had physical cash with which to demonstrate the act of paying for something you want, receiving change, and watching as your funds dwindled away if you spent more than you could afford. These days your kids likely watch you tap your phone and walk out of the shop with whatever you are buying.
One thing remains constant. The earlier you teach your kids the value of not wasting their money, the better.
Explain that in order to have money, you have to earn it. The money you spend on food, groceries, bills and their toys comes from working for a certain number of hours.
When your child sees you tap and go, explain that every time you do so, money comes out of your bank account.
Interest rates on savings accounts are starting to increase from some all-time lows, but are still not high enough to keep pace with inflation. Still, it’s important your kids know the value of saving. If they want to grow up and build wealth, they must save before they can invest. They should avoid frivolous spending on small bits and pieces when there is a bigger goal at hand. Explain to them how much they will save and how soon if they put a certain percentage of their money aside each week.
Also show them how compound interest works and how the interest payments they do receive will increase as they accumulate more money.
Speak their language
By now your child probably already knows how to use your phone better than you do.
Show them apps and games that will help them learn financial literacy. Apps such as RoosterMoney (teaching about short and long term business goals) and Bankaroo (which allows parents to pay pocket money to an account which kids can manage, along with receiving incentives as a bonus) are perfect for modern learning.
Speaking of incentives, kids are often encouraged by rewards. Offer to match some of their savings contributions, or take them to fun activities when they hit certain milestones and they are likelier to stay on track.
Credit where it’s due
Avoid using credit cards, full stop. An early lesson in life that could make or break your child’s financial future is to only spend money you have. Especially when the money you don’t have comes with ridiculous interest rates and a credit limit that reduces your own borrowing power.
Help them get a foot on the ladder
Most of us want to help our children financially. Rather than giving them money to go travelling or buying them a car, help them with a deposit for their first property. Explain that investing in property is a numbers game. It doesn’t have to be somewhere they want to live right away, but a way to accumulate wealth and further savings.