Parents' often despair of their kids money habits. Yet it's essential to arm kids to fight for their financial future.
I've covered the basics of kids and money in a Raboplus Blog, but thought I'd share some great tips I've picked up over the years.
Fairness: means different things in different families. Should you distribute money according to need, or equally? Is it "fair" to reward more the child who stays back and looks after his or her parents? Or if children have borrowed during a parents' lifetime, should they receive less in the Will? There are no hard and fast answers to these questions, but they're important to address before it's too late.
Let them see you managing your finances: Don't just talk. Sit down and show children your bank statement and the bills that you're forced to pay such as electricity. Yes, you risk them telling Little Johnny in the playground how much you earn (if they can multiply by 12 and then factor tax back into the total). Yet the learning opportunity here far outweighs the risks to your privacy.
Start actually investing: What really hit the savings message home to me – at age 12 – was the gift of some Winstone shares. Boy did seeing the value increase over time have a huge effect on me. Pretty soon I was taking up rights issues and buying more shares with savings from my meagre income working on Sundays in a takeaway bar.
Teach resourcefulness: When something breaks, don't just go out and replace it. Sit down with the child and see if there is a way you can fix it. Pull it apart, or buy some superglue.
Give monthly pocket money: We do weekly pocket money. But there is an argument that giving a monthly allowance forces your children to learn budgeting skills or go without. This only works if you're tough on those requests for extra money. As they get older it's not a bad idea to give children a clothing allowance as well. That way they need to budget for the latest brands, not pester you.
Don't just hand out money: It's your job to raise a grown-up, not keep your child happy. If your child is a cornucopia kid living in a home where the good life is available for the asking, you're on a fast track to ruining them. That's especially the case with adult children who ask for money – or are given it without asking. If you must loan money – perhaps for a business venture – make sure it is properly documented and you charge interest and expect repayments on time.
Ad-proof your children: Marketers are better at getting through to children than their parents are. Statements such as "get it before it runs out" strikes to the core of a child. Rather than banning commercial television, which just makes them more vulnerable later, consider asking your children probing questions about what they see – such as: "do you really think that will make your more popular? How?"
Banking: I read about one family who each month checks their daughter's bank balance with her. It's always the 3rd of the month, because that's the anniversary of her birthday.
We can't afford it:
You can be too frugal. "We can't afford it" used to be my blanket answer when my kids asked for something I wasn't prepared to buy. I thought I'd turn them into a chip off the old cheapskate. Instead says Ian Grant of Parents Inc, I should be asking them to use their creative energy to work out ways that we can afford whatever it is so they want rather than taking away hope and the belief that beauty has a value in its own right.
Finally, lessons learned early pay financial dividends for the rest of a child's life.