Good habits start young, and with Money Week this week, now is a great time to look at how we can support and nourish our kids’ financial journeys writes Banqer’s Simon Brown.
For some reason, a lot of people see money as a boring topic. But the fact is, it’s a construct we operate within and it touches every part of our lives. As the economic impact of Covid-19 has exemplified, having or not having money affects our health, wellbeing and general ability to thrive both as individuals and as a country.
While financial education is not a complete fix to problems like inequality and inequity, it can make a huge difference to our financial wellbeing over our lifetime. Developing financial knowledge, the confidence to ask questions and, most importantly, good habits around money are all well within reach, and particularly effective if you start young. Budgeting, living within your means, saving and investing consistently, and understanding market cycles all build up a good foundation of financial wellbeing, feeding into all other aspects of life.
Having an Aotearoa full of people well equipped to navigate their financial lives would benefit us all. Research tells us that even a modest increase in the financial literacy of our least financially literate would have a significant impact on job growth and our overall economy.
So how do we go about doing it?
Research shows that financial habits are formed in kids by the age of seven, so it’s important to start young. There’s also a lot to be gained from savings, compound interest and investment when time is on your side.
At home, introducing basic money concepts early can make a huge difference (and be surprisingly easy). If they’re young, try replacing their traditional piggy bank with three piggy banks instead: one for saving, one for spending, and one for sharing. You can introduce goals for each one, like saving up to buy a friend’s birthday present in the sharing section. Doing this gives kids the chance to experience and understand the different value that each option offers, and plan towards reaching a financial goal.
As your kids grow, so can the financial concepts you explore together. If you’re in the position to do so, give your child a small amount of money to manage each week with an understanding that this money is earned through working. From here you can help them budget their pocket money, learn the importance of planning and living within their means.
Be open with them. Talk about choices and explain the reasons behind your financial decisions so they gain an understanding of concepts like budgeting and saving, and can engage in the choices you’re making. Explain why you go to a certain petrol station, or why you’re buying one brand of juice over another.
While these exercises are brilliant for those parents so inclined, financial education should be available without barriers. Financial education classes in schools make sure no kid gets left out, allowing equitable access to those without financially educated parents, or with parents who are too busy.
Already, financial education is happening in both primary and secondary schools throughout Aotearoa. With resources like Banqer and Sorted in Schools, kids are learning first hand about the long term effects of financial decisions, how to protect themselves against risk through the likes of insurance, how to save for retirement through Kiwisaver, and how to budget.
It’s never too late to start learning about money. Those with someone young in their life also have the opportunity to incorporate financial learning into everyday interactions with money, or by encouraging their school to include financial education in their curriculum. This offers the chance to not only improve their financial wellbeing today, but the financial world of generations to come.