Raising Financially Fit Kids
This week I had the strangest experience.
I was on my way to a lunch meeting with a senior banker when he called and asked whether I’d mind if his teenage daughter joined us. He mumbled something about it being school holidays and then added, “besides I want her to learn something from you”.
It turned out that I learned from her. When they arrived I quickly realised that while his daughter may have been sweet sixteen she looked twenty-six – all made up and with a perfectly rehearsed pout.
And not less than 10 minutes after she sat down (and began, or actually continued, texting on her phone) she interrupted our conversation:
Sweet Sixteen: “Daddy, I’m bored!”Daddy: “Go for a walk to the shops then.”Sweet Sixteen: (extending her hand): “Give me money and I will.”Daddy (pulls out his wallet): “Umm.”
Sweet Sixteen (snatches a $50 note): “I’ll be back in 45 minutes.”
Daddy: “No, you’ll be back for more when the money runs out!”
I was gobsmacked – I thought these conversations only happened on Modern Family. In any event he was right – she came back inside 45 minutes, grabbed more money, and was off again. Her old man was nothing more than her personal parental piggy bank.
Now I have no experience raising a teenager, but as I left the meeting I couldn’t help wondering what her dad was teaching her about money, and where her behaviour would take her in the future.
This week Westpac published a survey on the topic of kids and money, called ‘Creating Brighter Financial Futures for Victorian Children’. The survey asked some tough questions of parents. And the answers underscore why I have such a tough time when I go into the teenage trenches (the classroom) to try and teach students about money.
Money for nothing?
The survey asked how much pocket money parents thought children should get. Some said $10, some said $20, some said more.
I say zero. They’re already well ahead getting free bills and board.
A parent’s job is to prepare their children for the real world, and in the real world, if you don’t work you don’t get paid.
For primary school kids, who can’t work in a coalmine (yet), household chores are the way to go. For older kids, Woolworths is the answer.
Ever since I was knee-high to a grasshopper I’ve worked, whether it was a paper round or following my dad around a country town helping him with his work (and being paid by the odd single share in BHP, thank you very much).
Eventually I reached the hallowed age of 14 and 9 months. That very day I walked into Woolworths (the pokies people), and got a job as the only male in the delicatessen. Picture this: I wore a white short-sleeved butcher’s jacket, a red bow-tie and a paper sailor’s hat. I looked like a corporate version of the Village People.
I was an awkward, pimple-faced part-time worker, slicing cold cuts for the minimum wage. But that job taught me the difference between salami and sausages (actually, not as much as you’d think), and that money had real value: eight bucks in my wallet equaled one hour of work.
Three little pigs
Over half the survey respondents (57.8%) reported that their children use a money box, although two-thirds (71.1%) thought their children should be able to spend their pocket money on whatever they want.
My take is that parents need to understand that an allowance isn’t spending money – it’s a tool for financial education.
Primary school kids should be paid to do extra chores around the house – usually a couple of bucks a job. Then they can put their ‘pay’ into three separate jam jars or piggy banks (it doesn’t really matter what containers you use so long as they’re see-through – kids learn by being able to see the money building up in the jar).
Why three separate containers?
One is for spending – kids need to learn how to become savvy shoppers, and the best way to teach them is through experience.
Young people always want everything right now, so the second container is for savings. Teaching them that they need to save for stuff is the cornerstone of an effective financial education, and pays lifelong dividends.
The final container should be marked giving. Done well, this is a life lesson in contentment – after all, the happiest people on the planet are those who give. It also teaches children that by living in Australia they’re already among the richest people on the planet, and it puts money in its proper perspective.
For teenagers flipping burgers, the same applies. They’ll have outgrown the piggy banks, so they can put their earnings into three separate bank accounts (spending, saving, giving) instead.
All of which is pretty commonsense stuff − work hard, spend wisely, save money, and give some of it away. But you’d be amazed at the number of 30-year-olds I meet who still haven’t worked it out – and many of them are parents themselves.
The survey found that only about half of the respondents (52.5%) felt very comfortable have the ‘money conversation’ with their children.
That’s probably why there’s almost universal agreement that teenagers need to be taught about money while they’re in school. And as someone involved in financial literacy training, I can assure you it can be a life-changing experience for some students – but generally only for those kids whose parents have already laid the groundwork long ago.
Think back to your childhood. Your ideas on how to handle money – rightly or wrongly – were probably set by watching your parents. Did they fight about it, or were they in control? Maybe they were frugal, or hard workers who spent more time at work than at home.
Or maybe, like Sweet Sixteen, you trained your parents that it was easier to open their wallet than spend time teaching you the value of money.
Either way, it’s likely that it has had a fairly direct correlation to how much money you have in the bank today – and how much you enjoy it and, ultimately, how much you appreciate it.
Tread Your Own Path!
The Three Little Piggy Banks
For Spending – learn to become a savvy shopper
For Saving – learn to save for things over time
For Giving – show your kids how fortunate they are
First published at barefootinvestor.com