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The Happy Saver: How to talk to kids about money


When it comes to teaching kids about money, how do you actually go about breaking down the financial jargon, having those conversations, and getting the kids involved? In this series, Ruth, the Central Otago-based personal finance writer behind The Happy Saver blog and podcast, shares her own experiences of talking to and teaching her 12-year-old daughter about money.

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    The Happy Saver

The Happy Saver: How to talk to kids about money

“What! NO WAY Mum, that’s crazy and unfair!” said my exasperated daughter as I drove her to school one morning. Goodness knows how it came up, but I was explaining how interest works. I’d just told her that if she were to borrow $100 off someone, they’d ask her to pay back the $100, PLUS another $10 as a ‘thank you’ for having lent the money—something we call ‘paying interest’.

I told her that if you lend your $100 to someone else or you ‘invest it’ with them, when you get your $100 back, you’ll get that gift of the extra $10 too—you ‘earn interest’. “Which would you rather do?” I asked. “Be the person who borrows the money, or the person who lends the money?” She wanted to be the lender, of course. It was a complete no-brainer to my then-ten-year-old.

Yet, as adults, many of us spend our entire lives paying interest instead of earning it. Why is that? It turns out you can cover off some pretty intense stuff during a quick drive to school if you just have a chat—and it’s a conversation that she still remembers two years down the track.

Why is it important to talk to kids about money?

Did someone take the time to teach you about earning and paying interest when you were young, or was it knowledge that you acquired as an adult, perhaps after you had taken out a credit card for the first time and learned the hard way what paying interest actually feels like?

One of the more common gripes that I hear from readers of my blog is that no one taught them the basics of money growing up. Instead, they had to head out into the world financially unprepared and work it all out by themselves!

Parents are often secretive with their money, whether it’s shielding the kids from their financial chaos, or setting money aside for their kids with the thought of ‘surprising’ them with it once they’re older. I take the opposite view. As a parent, I think it’s really important to talk about money and teach good financial habits early in life. If you start by using simple language and explanations like I did in the example above, you can work your way into the complexities as kids grow, giving them the financial confidence to make good decisions for themselves well before they leave home.

In our family, my daughter gets to see how hard we work, how we budget, how much we invest, how invested money earns a passive income, and how mindfully we manage our money. By having these open and honest chats, we’re helping her build up a mental picture of what life costs, and how we, as a whānau of three, go about paying for it.

But there’s no rule book for teaching kids about money; no curriculum to follow and tick off as you go. So how on earth do you do it?

Start with your money values

We all cite a key piece of advice (some good, some bad) that a friend or family member told us about money. As the person giving that advice, it’s worth thinking about what financial values you want to pass on. A few that I share with my daughter are:

  • Live on less than you earn

  • Money invested makes money

  • Earn interest, don’t pay it

  • A part of all you earn is yours to keep

  • Be generous with your time and money

One of the ways that we instil these values is through our rule that she needs to save and invest 50% of every dollar she earns. Once she’s done that, she can freely spend the rest. We teach her that money is meant to be enjoyed today, as long as you have set some aside to enjoy in the future as well. We teach her that money is a tool to be used to get to where you need to be.

Considering and leading with your financial values can help to build a really strong foundation for future conversations you have about money—and it might even get YOU thinking and challenging the way you manage money too!

Have daily money chats

Teaching financial literacy to kids takes just a little bit of maths, and a whole lot of conversation! In our house, the topic of money comes up every single day, and it’s never a taboo subject. We didn’t pick a specific age to start this conversation either. Instead, we’ve just always talked any financial decision through as a family—it’s just a regular part of life. We talk about:

  • How many hours I worked and what I was paid

  • Our net worth and how we grow it (e.g. how much we invested for the month in the share market and our KiwiSaver)

  • How we budget (e.g. going to the supermarket and talking about how much we allow for food each week)

  • Financial decisions we need to make (e.g. whether we should pay our rates invoice weekly, monthly or yearly)

  • When she wants to buy something, we research options and compare pricing. When there’s a big purchase on the horizon, we discuss how we break that cost down into smaller chunks and set money aside for it each week until we have enough saved.

My daughter overhears many of the conversations my husband Jonny and I have. Sometimes she has a question, sometimes not, but I know that she’s taking a lot of it in, regardless. At such a young age, I don’t expect her to know all the terminology we use, nor fully understand what we’re talking about, but she’s starting to understand the concepts around general money management.

She also sees that discussing money is just a normal thing to do, and that there doesn’t have to be stress, drama, or tension. Instead, she sees two adults in control of their money. Leading by example is key, because kids will be watching and learning from you—of that you can be sure!

Every good adventure starts with a conversation

Whatever the age of the kids in your life, it’s time to start a conversation about money. Start early, talk often, tell stories, address each question as it comes up, and drop a few nuggets of wisdom in there yourself. You will get the odd ‘eye roll’ and ‘not now please’, but just pick your moments and persevere because persistence and patience will literally pay dividends over their lifetime!

I know that I’m giving my daughter a real head start in life by letting her become financially confident and independent while she’s still at home. When she heads out into the world, I want to know that she’s in control of her bank account, saving for what she wants, doesn’t have a credit card, and planning for things so she can take on every opportunity offered to her without stressing about how to pay for it.

Money is just one aspect of living a good life, but it’s such an important one because if you understand how it works, it opens up a massive variety of options—and I know we all want our kids to head out and live their best life. It starts right here at home, with just a little bit of maths and a few well-timed conversations...and slowly her knowledge grows!

In Part 2 of this series, Ruth shares her tips and tricks on how to get kids more involved with money.

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