Our children’s saving strategies as they grow up will be poles apart from ours – they have to be because the world we live in is very different.
The property market is now out of reach for many young people and interest on savings accounts is barely more than inflation. We’re almost cashless, we’re renting for longer – if not forever – and new technology has recently been created to help people with their budgeting, saving and investing. It’s a different landscape than what it was 20-30 years ago; the fundamentals remain but we need to change some of the key messages we instill in our kids.
It’s important to keep teaching them the basics, like having to earn their pocket money and not blowing it all on toys – but today’s kids need awareness of all the options so that they can be savvy with their money in the modern world.
Here are six modern money lessons the kids of today need to learn:
1. While hiding money under your mattress may have worked as a money-growing strategy 30 years ago, the old-fashioned ‘stick every dollar in your piggy bank’ mentality doesn’t really apply anymore. Why not put half in the piggy bank and spend the other half of that money to make more money? Eg. Invest in nice cardboard and pens to create your own collection of birthday cards to sell to friends and neighbours. Lesson: Doing well with money is about thinking outside the box, maximising your skills and not being afraid to invest a reasonable amount of capital to create something bigger.
2. Cash registers are still a popular kids toy, but have you noticed that along with the coins and notes most of them now come with a credit card or two? In a cashless society, it’s easy to forget about teaching the financial basics that they’ll need all their lives but you can do it in new ways now. For example, if you’ve decided to bank your kids’ pocket money automatically, show them the balance on your banking app so they understand where the money is and the relationship between what they earn and what they spend. Lesson: Plastic isn’t always fantastic – live within your means and beware the line of credit
3. As kids get older it’s important that they don’t get sucked into the latest investing fad. History has a funny way of repeating itself and hearing from your kids “this time it’s different” could be a big red flag. Encouraging them to read books like The Barefoot Investor and talking to them about the business section of the newspaper and world events is a great way to help your kids for kids to start to educate themselves on not just the importance of saving and investing, but also the dangers of taking on debt. Lesson: Understand as much as you can about your money and each new opportunity that presents itself.
4. Remember when you used to be able to get more than 5% interest on the money in your account?
Oh, the good ol’ days….but they don’t exist anymore. As kids get a bit older, we can start to challenge the thought that money goes straight into the bank account that mum and dad set up. Replace with: invest your money where you will get the best return. What about shares? What about a different account with a higher interest? Lesson: There are lots of ways your money can grow, it’s up to you to look at the options and weigh up the good and the bad.
5. For another way to teach kids about making their money work for them, you could consider replacing the physical piggy bank with something like an Acorns account, which is a great way to get a basic portfolio and invested in the market with small amounts of money. Monthly fees of $1.25 can dig into any potential returns if the account balance is under $200, but the lessons your kids will learn will be far more important. Lesson: From little things, big things grow!