How to teach your kids about money

  • Wondering how on Earth your kids are going to be able to afford their first home?
  • Trying to figure out how to give your kids a head start in life?
  • Do you ever wish you’d known more about money when you were younger?
  • Do you wish it’d been simplified for you? That you had someone to hold your hand through all the complex decisions and choices ?

If so, this is for you…

As a financial adviser I’m up to my eyeballs in all things money – investing, budgeting, saving and planning – all day. Here’s what and how I teach my kids about money, investment and savings.

When I’m working with a new client we talk about who and what is most important to them. Inevitably it comes back to family and quite often their children. As parents, we want the best for our kids, but it can be tricky – particularly with money.

Just stick it in the bank?

I often get asked “hey Jono we putting $X into a savings account for the kids each month. Interest rates are 1% if we’re lucky and it’s just not going anywhere. Is there something else, something better, something that’s going to grow?”

The simple answer is yes. Before you look at what may be better for the long term future, there’s a fundamental choice about teaching your children about money.   

Give them a fish, or teach them to fish?

To build up a bank account or an investment and give it to your kids, perhaps on their 18th or 21st birthday feels great for you. Job done, here’s your head start, but you are giving them something and then expecting them to know what to do with it.

It goes back to that old analogy give a man a fish you feed him for a day versus teaching him to fish.

Build it together

What I prefer is to do the kids investments with them. The trick is trying to find something that they care about – something that they’re interested in. I’ll save you the time – kids don’t care about low-cost well-diversified managed funds. They get bored (sometimes we get bored as adults) but finding that thing that’s super important to them brings everything into very sharp, clear focus. Kids are incredibly switched on – they pick this stuff so quickly once it’s relevant to them.

Kids investments – find what’s important – to them

My boys are 10 and 7. They are 100% focussed on gaming. It doesn’t make a lot of sense to me, I’m not very good at it, but that doesn’t matter – it’s really important to them. I’ve found them an investment that invests in gaming and suddenly I’ve got a link between what I want to teach them and what they want to learn. I’ve explained to them that by owning this investment, they actually own the companies they love.

I hear you laughing – what kid loves companies? But hear me out.

The kids investment has shares in Microsoft – which they understand because we have Windows. They also understand it because Microsoft owns Minecraft and they’re obsessed with Minecraft.

It has shares in Nintendo – we’ve got a Nintendo switch and that’s exciting to them.

It has shares in Roblox and that’s incredibly exciting. They spend their pocket money on Robux.

They understand that when the other kids at school spend their pocket money on Robux the business makes money. That means their investment grows.

I realised they got it when they asked “So you mean when other kids spend their pocket money on Robux I get some of it?”

It’s the start an understanding, a deeper understanding of how a business works. That’s something that I really want my kids to have. I want them to understand that putting money in the bank account, as I was taught to do as a kid, is great because saving is important but you never going to build real wealth doing that. The way to build wealth, grow wealth is to own businesses and it’s effectively what they’re doing.

Owning businesses

My boys understand at 10 and 7 that they are business owners. They don’t work in them (though that would apparently be “sick”) they own them. They own part of Microsoft and Nintendo, and they own part of Roblox and I love that lesson.

Making the boring tangible

We also get to start to talk about bigger concepts like diversification. Microsoft had a great day with a new product launch. Roblox had an awful day because their new upgrade was delayed that caused some drama. They can watch these concepts play out in real life. As this happens they watch the underlying investments going up and down.

Finally, I want them to understand risk (yawn?). I want them to understand it now.

Remember the first time you put on your seatbelt to drive? You were probably petrified. Now you don’t give it a second thought -not only has your driving improved over time, but you understand the risks. In the same way the investments will have their ups and downs and that means they will learn to balance fear and greed. Finally we always compare it back to what if they did nothing – if we left the money in the bank would you be better off or worse off?

As a parent, if I can teach them to invest for the long term, diversify their holdings, lower their costs and manage risk, I’ve started down the right track.

If you enjoyed this article, you may also enjoy this – a different take on education with a little something in it for you

For more tips on kids and money, check out the Money Smart website

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