“One father is more than a hundred schoolmasters’ – George Herbert.
We teach our kids new things every day; how to throw a football, read a book, change a tyre… but have you thought about what you’re teaching your children about money? Dads – and mums – have an important role to play in ensuring that their children grow up to have a healthy financial future.
This Father’s Day we’ve asked some of The Real CFO columnists about the financial lessons they’re imparting on the next generation.
“Start as early as possible”
Firstly, at what age should we start talking to children about money? “As early as possible” says Grant Martinella, William Buck Audit Director and father to Henry (9), Matilda (7) and Beau (4). He explains;
“We all know someone who’s over 30, lives week to week and can’t pay their own bills. While some people fall on tough times, more often or not they’ve never been taught how to budget. This is a behaviour that needs to be learned early. Waiting until they have their first part time job is too late – it needs to start in primary school, or sooner.”
“Teach kids about the value of things… not just their price.”
All the dads agreed that starting early is important. Yet teaching a child in kindergarten about money can be challenging. Greg Travers, William Buck Tax Director and father to Lizzy (12), Monique (8) and Adam (5) says that the answer lies in creating a healthy mindset rather than focusing solely on money:
“Money can be a weird concept for kids because it’s intangible; it magically appears from a hole in the wall or a plastic card. Rather than just focus on money, my wife and I take a principled approach. The kids are taught the value of re-using things, respecting the things that they’ve got and not always needing the next new toy.”
The aim is to teach children about the value of things not just their price. One way of teaching younger children about relative value is by using comparisons. Greg explains;
“The supermarket’s become a great classroom. My kids love raspberries but when they’re $8 a punnet, we refuse to buy them. Instead we ask the kids to fill a bag with apples and weigh them. The first time they saw how many apples they could get for the same price, they were shocked and of course wanted the apples.
Over time, we’ve introduced the monetary aspect and now they know that they can only have raspberries when they’re $3 or less. Whether we can afford the raspberries or not, is not the issue. It’s about understanding their value”
As the kids get older, the comparisons can become more complex. Greg says;
“With Lizzy who’s 12, we’re a lot more transparent about money. If she wants to do an expensive activity, we’ll ask her straight out; do you think we should be spending the family’s money on this or that?”
“Money is earned through work”
Part of educating children about money is teaching them where it comes from. The idea that money is earned through work is something that Sophia Barry (7) is just coming to realise. Craig Barry, William Buck Tax Director and father to Sophia and Ted (3) explains;
“Sophia now understands that I don’t go to work because I enjoy being away from the family, but because I need to earn money to pay for their food, home and clothes. Because of this she’s become a lot more aware of her choices. While her face lights up at the thought of $10 worth of lollies, she knows that I work for it and the same amount could put a meal on the table for the whole family.”
With Sophia already playing at shops and hairdressers, Craig is sure she’ll take on a part-time job when she’s a teenager. He says;
‘I would encourage both my kids to have part-time jobs. My siblings and I all worked and it taught us not only the value of money but the value of other people’s contribution. It requires the work of everyone to keep a company going”
“Give children control over their own money”
Grant’s children have learnt about the need to work for money by earning their own allowance. Grant explains;
“We have a job chart for weekly pocket money. The rules are simple. If you don’t do all your jobs you don’t get pocket money. Extra money can be earned by doing extra chores around the house.
This works well for Beau who loves his matchbox cars and will work hard to buy a couple more. The trouble with Henry is that I’ve taught him too well and he now negotiates his rates for any additional services – particularly in the holidays! But I don’t mind too much because he’s a great saver.
With Matilda it’s been more difficult and in spite of our best intentions she’s more of a spender than a saver. That’s okay too, it’s important to recognise that all kids will be different.”
While Grant and his wife encourage their children to save at least twenty-five per cent of their pocket money, he reassures them that it’s also okay to enjoy the fruits of their labour and spend a little now and then.
Giving children control over their own money can be one of the easiest ways to teach them the essential financial management skills needed later in life according to Clyde Young, William Buck Business Advisory Director and father to Simone (28), Sacha (26) and Steven (22). He says;
“When the kids were young we negotiated with them over what their allowance covered. They simply weren’t allowed to fritter their money away. This really helped when they became teenagers and started their first part-time jobs. While their friends were running out of cash, the kids were able to save for the big ticket items they really wanted.”
Jeffrey Luckins, William Buck Audit Director and father to Cameron (21) and Brianna (19) has a more structured approach. Whether they’re spending their own money or that of their parents Jeffrey believes children should be taught the art of due diligence;
“I’ve always encouraged my kids to research their choices. For example, at the Royal Melbourne Show, they were allowed a maximum of four show bags each and they had a total budget from which to make their choices. This meant they needed to do their due diligence before leaving home in order to maximise the value and enjoyment they received from their show bag purchases.
In this way they learnt that money is finite and making the right choices is paramount. Now, as young adults they continue to research their intended purchases and the conversations continue to be around value, reliability and enjoyment. The only difference is that today the show bags are computers, furniture and cars.”
“Just because you can buy something it doesn’t mean you should”
Creating the understanding that money is a finite resource is one of life’s most valuable lessons.
While it can be tempting to spoil your kids with the treats you didn’t have as a child, each of the dads were clear on the need to enforce constraints.
“Just because you can buy something for your kids, it doesn’t mean you should.” says Leo Tutt William Buck Audit Director and father to Emily (24), Edward (21) and Charles (19).
“Setting boundaries early allows your children to manage their expectations and live within their means as they get older. With the accessibility of credit these days, it’s really easy for young adults who have never had any boundaries to over-extend themselves and get into trouble.”
Holding back how much you spend on your children can be a challenge when they reach school age and see their friends receive expensive Christmas gifts or go on overseas holidays. Rather than worry about this, Greg sees it as teaching opportunity.
“Kids tend to see things in black and white. There are poor people and rich people. They know that we’re not ‘poor’ so why do we not buy expensive things? This is an opportunity to teach them how fortunate we are, and part of being fortunate is about helping others not just spending money on ourselves. This involves some sacrifice”
Or as Clyde pragmatically puts it “You can’t always get what you want.”
“Actions speak louder than words”
As parents we know that children learn as much from what we do, as what we say.
“Actions speak louder than words” Leo says, “I haven’t always got it right, and I admit that I’m not perfect but I try to model good behaviour. It’s been important for my wife and I to emphasise the importance of community over possessions. My wife does a lot for the community including volunteering her time for Meals and Wheels, and I use my professional role to help not-for profits.”
Modelling good behaviour is just one part of the equation. Numerous studies have shown that children are more inclined to heed their parents’ advice, if that parent spends time with them. This is something that is abundantly clear to Jeffrey;
“When my son, Cameron first started studying agriculture, he was still on his L plates. Each Sunday, we’d hop in the car and he’d drive the 350 kilometres to Ag College in the Wimmera from Melbourne, stopping for lunch at the Western Hotel in Ballarat. Then I would return to Melbourne, a round trip of about 9 hours.
For Cameron, this commitment meant as much to him as the investment in his education. Those hours in the car are some of the most valuable and enjoyable times we’ve spent together. Sometimes I think I learnt as much as he did.”
What financial lessons are you teaching your kids? Whose responsibility is it to teach the next generation about money? Let us know in the comments below.