Investing for Kids: a Q&A with The Happy Saver
We asked Ruth about financial literacy for kids, teaching her daughter about investing, and why people are still hesitant to talk about money.
Tell us a bit about yourself!
I’m Ruth. I live in Alexandra with my husband Jonny and our ten-year-old daughter. I started The Happy Saver over two years ago when I was looking to invest our money and came up against a brick wall of incredibly confusing information! I said to Jonny, “if I’m struggling with this, other’s must be too”, so he kept telling me to share what I was learning.
Each and every Sunday, I put up a blog post about something that has occurred to me that week. People have steadily joined my community, and every day, I’m talking to people with questions about money. People just want to talk about money in a straight-up way, with no secrecy, no agenda, and no judgement. I am endlessly curious about why people do what they do with their money, and I want to help others handle the money in their own lives better.
On The Happy Saver, you’ve shared your experience teaching your daughter about money. Why is it important for kids to learn about money?
From all the people I have conversed with over the last couple of years, it has become 100% clear to me that if you were taught as a child how money works, you are good with money as an adult. Education works! Through teaching my daughter about money, I get to help her avoid some of the pain I had handling money growing up. With guidance, I could’ve gotten ahead so much earlier in life!
Jonny and I regularly contribute to my daughter’s KiwiSaver, index fund, and bank account to give her a head start. But we won’t just say “Surprise! Here’s a chunk of money!” at the age of 18. Instead, we actively talk about it so she’ll fully understand just how long it has taken to save up that money on her behalf. Even at the age of 10, she is actively contributing to these investments! She knows that she has to save 50% of everything she earns, no excuses. She received $10 from her grandparents this week (for shooting goals at hockey), and without even asking, brought me $5 to “invest please Mum”! She’s learnt that as she’s putting money aside for her future, she can enjoy the money left over today.
What are some things that parents can do to help support their kids’ financial education?
Parents need to understand their own financial situation first, and look at whether they’re on the right track. Using what I’ve learned, I’ve been talking to my daughter from when she was young about money in an age-appropriate way. Simple stuff, like how much a bag of apples costs at the supermarket, or showing her that five 20c coins are the same as a $1 coin.
As she’s gotten older, I’ve been telling her how much money we earn each week, and how much we pay for our power bill, rates, etc. Just household stuff about the way money works in our everyday lives! If we were planning a family holiday, we’d explain the costs of that, and how long we were going to save to achieve it. It would be great if this was taught at school, but in the meantime, I’m more than happy to share my knowledge with her.
How have you taught your daughter about investing?
When I talk to my daughter about investing, I keep the explanation and language very simple so she gets the point, and grab a learning opportunity when I can. For example, my daughter sees how excited I get when I receive a dividend payout! I explain to her that I’ve just received extra income from the companies I’m invested in “as a way of saying thank you”, and that I didn’t have to leave home to earn that money.
A simple visual tool I use is a paper chain. For every $1000 her investments increase, she adds another link. As you could imagine, a long period of time passes before she adds a link, which shows her that it takes a long time to earn money! Any money she thinks of spending should be a well thought out decision, because it will take her a long time to earn back.
Every couple months, we create a ‘bank statement’ for her which tells her how much she’s earned ($30 for feeding the neighbour’s cat for three weeks) and spent ($15 for a soft toy from Paper Plus). We use words, graphs and pictures to show her how much she has compared to last month, so she can clearly see it. It shows her how much interest she has earned, how much tax she has paid, and above all else, that money invested makes money.
You’ve also blogged about the importance of talking more openly about money. Why should we talk about money more?
People enjoy my blog because I share my actual numbers, and it gives people a benchmark to compare themselves against. I’m an open book, and if anyone asks me what my net worth is or how much I earn and spend, I just tell them. To me, it’s no big deal, but I know to others, I am often the only person to ever discuss the finer details with them—especially when they can’t even talk to their parents or siblings about it!
Understanding where your money comes and goes gives you control over your money and your life. Readers of my blog often have an inkling that they could be doing things differently, and by hearing my journey and that of others, it gives them the advice and tools to make a change. And when people succeed, they want to share that, and eventually a conversation opens up with those around them.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.