Home / Blog / Coaching your kids about money – 3 tips to impact them for life

Coaching your kids about money – 3 tips to impact them for life

May 2, 2019 | Financial Advice

Author: Matthew Simpson-Foster
(Money Coach to 3 future wealthy children)

Hindsight is an interesting thing! If only I had today’s knowledge, wisdom and perspective 30 years ago – I’d love to see what kind of position I’d be in today.

But that doesn’t mean my kids can’t have some of that knowledge.

They say that you build your ‘belief’ system by the time you are 7 years old. All of your experiences, values and interactions up until the age of 7 make up this belief system, and can have profound effect on your future money habits. Since you would usually spend the most time with your parents between the ages of 0-7, we often take on some (if not all) of our parents’ beliefs, especially when it comes to money. This may not be a good thing, as our parents may have had an experience that lead to a belief that they don’t have enough (and will never have enough) money, i.e. a scarcity mindset.

Knowing all of this, I have made it my duty to educate my kids on not only money, but building a belief system where they come from a place of abundance.

To come from a place of abundance, you need to have an abundant mindset – that is, you need to truly believe that you now have enough, you have always had enough, and you always will have enough. Time, money, energy, clients, work, it doesn’t matter on the topic, it’s the belief.

Building a belief system is one thing, but teaching your kids some good money habits will certainly help them to form some good habits.

Some tips for creating good money habits for your kids are:

1. Teach them about how money works, and the value of money

Sure, we need to teach kids about coins and notes (and cards), and how to buy an iceblock from the school canteen; but we also need to teach them about the value of money, that is, how much effort needs to go into producing that $2 in order to buy that iceblock. No one in the real world is just given money for nothing, they have to earn it. Which brings us to #2.

2. Make them work for their pocket money

The sooner kids realise that have to earn their money, the easier it will be to truly educate them about the value of money. Kids don’t grasp the concept (at an early age anyway) that we go to work to earn money, however, they do understand that when they complete a number of chores (or set tasks), that they will have earned a certain amount of money for it.

3. Teach them about the ‘Savings Buckets’

If you were to give your child $20 at the shops and told them they could do whatever they wanted with it, what would the outcome be? Save it for later? Spend a little? No, they would likely spend it all at once. But if you teach your kids about the Savings Buckets – a concept that we Financial Advisers use to segregate savings into different purposes – they will then have the knowledge to make a decision about how they spend it.

Once they earn their money, get them to split that money into 3 different envelopes. Label the envelopes with the following:

  • Spending
  • Saving
  • Shield

Now, how it gets split up is up to you, but obviously you want to make sure that that it’s not all going in the spending envelope. Make a rule for them to follow, like simply it gets split 1/3 into each envelope.

The ‘Spending’ envelope is pretty straight forward: they can use this at their leisure. However, they need to be aware that once it has been spent, they can’t use the other envelopes.

The ‘Saving’ envelope is straight forward too: use this bucket to save up money over time to buy the ‘big ticket items’ like a new bike or video game. It’s important that there is a rule on this one where it must get to a certain amount (maybe $100 or $200) before it is touched, that way they understand the concept of long-term savings.

The ‘Shield’ envelope – now this is the hard one: trying to teach your kids about saving for the future. This one is really about educating your kids on good savings habits; to set themselves up for the future, either for a house deposit, first car, uni fees etc. – which is not easy for a 5 year old (or 13 year old for that matter) to understand.

At regular intervals (or maybe for certain amounts saved), the contents of this envelope could be deposited into a savings account, where the effect of compounding interest over a 10-15 year period would have a dramatic effect on their savings, regardless of the interest rate. It is also important that your kids see the account statements, so they can understand the impact of their savings over time… it’s all about education.

Implementation of these tips provides the opportunity to create the greatest money habits for your children. They will also help to build a belief system that the kids use their entire life, as well as passing on to their kids – setting a new trend for future generations of your family.

Finally, remember these words from the great Warren Buffet “The more you learn, the more you earn.”

Take your first step towards securing your family’s future and book a financial planning meeting with one of Central Coast Financial Planning Group’s Wealth Creation Specialists.


Related Articles