Image: Archi Banal
Image: Archi Banal

MoneyDecember 29, 2021

How to grow your kids’ money smarts

Image: Archi Banal
Image: Archi Banal

Your kids might get a little extra dosh these holidays. Here’s how they can use it.

Kids get money. They’re sharp enough to know when you flick them a fiver, that’s a decent sum to spend at the dairy. And when it stretches to 50 bucks, they can join the masses to get Boxing Day sale wins (yep, even retro Vans go on sale then).

It starts around age four. Children see that money can be exchanged for cool stuff. By six, they start to understand whether they have enough money to buy something they want. And by seven, they’re worldly enough to understand the subtleties of spending and saving (ever been bribed by a kid?). 

It’s during this time that their own money habits start to take shape. And it’s also when you can choose to be their wing person, or let them go it alone. 

Voting for the former, here are some easy ways to help your kids grow their money smarts. 

Babies and toddlers

Money can be triggering – envy, power, greed. The spillover is, as parents, we might get stuck thinking we’re not ideal financial role models. That we don’t know all there is to know about money (fact: we don’t and never will). Or that the money talk can wait. 

But the moment your toddler enjoys an ice block from the dairy on a sizzling hot summer’s day or stands in line at Mr Whippy, they start to see that money can be exchanged, or a card swiped, for something they really, really want. They see how money works and they’re already on their journey of learning about money. 

Start with play time

A tonne of New Zealand kids love playing shop. Remember New World’s Little Shop, which came with all levels of tutu-tantrums? While it was a marketing tool of Plato proportions, it was also a huge success. And it set up kids to play and pay for miniature, real-life items and begin to understand the concept of exchanging money for food. Pretty cool. 

Many piggy banks (Photo: Getty Images)

Try four jars

The four jar system teaches kids the power of goals and budgeting. When you’ve finished your jar of Fix & Fogg peanut butter, whip off the labels and stick on some new ones: spending, saving, investing and giving. Kids will see how the money ebbs and flows in each one. They wanna hit the movies? That’s a dip in their spending fund. Are they saving for a skateboard? Watch their savings grow. If their spending fund dips to zero, they can see clearly there’s nothing left until it’s pocket money time again. Bummer. 

Investing can start at any time

By starting investing young – yes, they can start from the day they’re born – kids’ investments have time on their side to grow and ride out inevitable market waves. And with savings account interest rates sitting so low, the bank may not be the only way to grow their longer term nest egg. 

When kids hit school

Your kids have ticked off their ABCs and 123s, so now might be time to get them excited about not just playing shop, but owning the brands in them by investing. Investing doesn’t need to be a yawn fest! 

Somewhere between six and 12, kids start to build strong opinions of what they like and don’t like. And it’s possible the companies and brands they love are listed on the share markets – from their fave kicks and gaming consoles to the streaming platform they binge-watched over lockdown. Or they might be all up in robots, space or becoming Monopoly-esque property-owning moguls. Whatever your child’s into, there could be a company they’d be excited to own (even if it’s just a slice, it’s theirs until they sell it!). 

Have the money chat

Money and how we earn and spend it doesn’t need to be a secret. So front-foot it and share how you make it, what you spend it on, and why things cost what they do. Talk about borrowing and paying money back. Chuck in what interest does when you’re in debt. If you set up an investment account when they were younger, show them how it’s changed over time.

Grow the goals, get the gains

Footballs and water balloons cost money. Do they want the crazy glasses or a necklace? If they cost $12, they’d need to save $2 a week for six weeks. As bonus, it teaches them about delayed gratification too.

Two children with caps and t shirts on, ice creams in hand, concentrating pretty hard on them. Beauty of a day at the beach.
Let your child buy their own ice creams. (Photo: LazingBee / iStock via Getty)

Open their eyes to shop shelves

Get your child to read price labels while you shop. Grab a couple of similar items then weigh up size and price to compare the value for money of each. Ask them to choose which one to buy. Their choices may surprise you and it might even mean more money for their jars back home. 


Ah, teenagers (I have two). This is when they fiercely protect their decision-making prowess.  And it might be when they want to be more involved in their investments. This could also be the time they start setting some bigger goals and investing towards them. Maybe it’s buying a first car in a few years, and it may even help them avoid FOMO investing down the track. 

Saving vs. investing

This is a good time to show kids that the $500 they’ve built up grows differently in a savings account than an investing account. For example, if they’re getting a 1% interest rate in the bank, what’s that in 10 years? And what ‘s the difference if that same amount was invested with average market returns based on an average annual 10% historical growth rate? Hint: It’s $552 vs $1,296. But of course, there are no guarantees ever (with savings or investment accounts) and past performance can never be relied on as an indicator of future performance.

Money for now and in the future

Plenty of teens get a first job. Now could be a good time to move them from managing their money using the four jars, to managing it online. They can continue to split their earnings into different “pots” but this time it’s electronic and another step towards them developing some positive money habits.

Discover the magic of compounding growth

Compounding growth is when money makes more money faster over time – think of a snowball rolling down a hill, growing as it goes. Sure, it’s a tricky subject to get your head around, but this explains it in simple terms. Your teen’s already a pro in training, let them discover how compounding growth works.

Breathe life into big, audacious dreams

It may have started with them wanting a pet unicorn, then grown into dreams of owning the best Lego set on the block. And now your kid’s dreams may be looking forward to going on an OE, buying their first home or retiring by the beach. Chat about what they want in their future. And get them thinking about how they might work towards achieving it – Sorted’s savings calculator might help.

The truth is, kids will learn about money with or without you. If they learn and grow alongside you, you’ll both be able to navigate the lessons along the way (even decisions they regret later will teach them money lessons and help build their money story). You’ll learn that it doesn’t take a stack of time (and is time well-spent!), and starting now is the best time to begin acing those money goals. 

Kristen Lunman is the CEO of Hatch, a digital investing platform that gives New Zealanders access to the US share markets.

This article is for informational purposes only and is not financial advice. It is not a recommendation to invest in any of the brands, companies or funds listed in it. You should consider seeking independent financial advice from a licensed financial advice provider before making any investment decisions. With investing, your money isn’t guaranteed to grow and there’s always a risk you may lose money. Information is current as at the time of publication.

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