How Talking to Your Kids About Money Could Set Them up for Life

Money can be a bit like Fight Club sometimes. The first rule (used to be), you don't talk about it.

If you’re a parent (or soon to be) you’ve got a huge chance to change that dynamic by teaching financial literacy early. Talking openly about money with your kids, in an age appropriate way, could set them up for life. Here’s how.

There’s no harm in talking about bills, earning money, debt, investing, and spending with your kids, as long as you keep it age appropriate, and stress-free. If you do this you’re giving your kids the confidence to ask questions, the curiosity to learn, and the room to make mistakes early.

At this age, kids are too busy learning to walk, talk, and throw tantrums to worry about their KiwiSaver balance. So most of the work happens behind the scenes by the parents:

• IRD number: you can get one as soon as their birth is registered. My partner (a very on-brand accountant) did this in the first month of my daughter’s life. This makes it possible to open investment accounts, bank accounts, and KiwiSaver accounts in their name.
• Joining a KiwiSaver scheme: and contributing whatever you can regularly. When they’re 16 they’ll then be eligible for government and employer contributions, helping to boost their balance.
• Setting up investment accounts: we also set up an investment account which we contribute to regularly, this could help her pay for uni or maybe buy her first car. We’ll see!

The secret to successful investing is time, so starting early lets compound interest do its thing. Even a small amount, can grow into something meaningful over a longer horizon.

Read more about investing for kids

Something to remember - KiwiSaver is locked in until 65 or buying a first home. Other investments can be withdrawn but only for your child's benefit.

At this age kids are beginning to understand money as a concept. Instead of hosting an economics 101 lecture, try teaching through playing and doing.

• A play shop at home with toy coins can show how money gets exchanged for things and runs out.
• Involve them in real shopping, talk about the difference between needs and wants (i.e. we need veggies, we want ice cream). Let them spend $5 at the supermarket or toy store every now and then.
• Try a transparent piggy bank to show how things buildup. This enables them to save little bits of money they get from doing little jobs, or tidying their toys, then see it slowly increase.

Kids this age often learn best by doing, so you can introduce pocket money as a teaching tool ($5 or $10 a week is plenty). They can practice spending their own money, which will teach them that when it runs out, they can’t buy more.

If they want something big, they’ll need to save and avoid buying treats or little toys for a bit. This teaches delayed gratification, forward planning, and prioritisation - some of the most important money skills, and ones they’ll need when they leave home.

Once your kids are teens you can talk more frankly about how money works in the real world. A few topics worth covering:

• How debt works, and the concept of paying interest. How it works, the risks and the difference between good debt VS bad debt.
• Opening a real online savings account. With your help, they can deposit money earned and watch interest work for them, not against them.
• Investing and how it works. You might take it even further and open an account and make investments together (or give them visibility of the investments you’ve already set up for them).
• Earning their own money. Pocket money is a great way to teach, but a part-time job or a little business mowing lawns, or walking dogs is even better. It’s also a great time to teach teens how to read a payslip and check their tax.
• Budgeting. Don’t keep yours a secret. If you’re paying bills, or firing up a spreadsheet, talk to them about it, one day they’ll be doing the same.
• Setting goals and paying yourself first: help your kids set realistic goals, then carve off some of their pay before spending. This is great practice for the big stuff - like buying a house, saving for a trip or buying a car.
• Shopping around: if your teen wants to buy something, it’s a great opportunity to teach them to compare prices between shops online. If something seems overpriced, help them find alternatives or compromise.

Encourage them to learn independently too). There are plenty of resources out there - see below.

One of the best ways to learn about money is to make mistakes. It’s a lot cheaper to make them at 10 than at 30. If they spend their savings and can’t buy something they’ve been saving up for, don’t buy it for them - they’ll learn much more if they have to start again and wait.

Kids will feel your money stress, even if they’re too young to name it,- and they’ll clock impulse buys and credit card debt. What they see you do with money matters as much as what you say about it.

There are loads of kids books about money, from picture books teaching the basics and modelling good or bad behaviour, to resources for teens who want to start investing. Barefoot for Kids is a popular one for those aged 10-16.

Board games are a great way for kids to learn about money concepts. Monopoly, the Game of Life, Payday, and the Allowance Game are all good examples.

The internet is chock full of financial resources for kids. MoneyTime is one example - it combines interactive financial literacy lessons, with a money management game to make learning fun.

Financial literacy is now taught in schools - woohoo! You can access all curriculum resources at the Sorted in Schools website to help inform the way you teach your kids about money.