In our regular column, Money Matters, SIMON PARFITT of Pyrmont Wealth Management answers your burning questions on finance and provides financial planning and investment advice. Here, he looks at five helpful ways to approach the topic of money with kids.
“How should I teach my child about money?”
One of the first steps in our LifePlan financial planning process is to discuss with our clients the origins of their money beliefs. We ask questions such as:
- What was your earliest memory of money?
- What was the biggest lesson you learnt about money?
- What was money like to you growing up? Sometimes, when asking these sorts of things, we’re met with a look of wonder as to their relevance in a discussion of future planning.
In fact, these things are hugely relevant as a significant part of how we behave with money as adults. Our relationship with money and our own money biases stem from how we were treated as children and the lessons we were taught or more likely observed.
In our process, we ask these things to determine if there is an issue or a bias that we need to address before we can effectively plan. But they also highlight to us why it’s so important that we talk about money with our own children.
With that in mind, here are five things to think about when discussing money with your kids.
#1 Money is not a dirty word
Being open and prepared to talk about money is vital in having a positive relationship with it. From a young age, try and explain what money is and how it works – especially the lesson that it doesn’t grow on trees!
#2 Be balanced
You might be happy to give your children pocket money, but if they get used to receiving money for not doing anything, this can have a negative impact as they get older – it can lead to them being too free with money. In the same way, if they’re taught that you must earn every cent that you receive, then in later life receiving an unearned inheritance or gift can be difficult. A balanced approach is best.
#3 Teach them the lesson of having to wait
We live in a time of instant gratification, especially with easy credit and plastic spending. Teaching children the lesson of waiting for something they want is powerful. Setting them a goal of saving for something small, so it can be achieved quite quickly, will help get them into good habits. In doing this, you can also help them keep track of how close they are to getting what they want, which can be fun.
#4 Teach them about the impact of money decisions
If you’re giving them money to buy something, don’t let them go over budget. And don’t give in to buying them extra, or a replacement if they didn’t like it the first time around. If they buy something they later regret, that’s fine. It will help them to decide how to spend their money next time and that there are money consequences.
#5 Teach them that money isn’t everything!
Most importantly, teach them that money is a useful tool, but that it isn’t the most important thing. The constant desire to get more and more is becoming sadly apparent in today’s society. There are lots of great free things to do. And, outside of money, family, friends and living your best life are far more important.
Ask Pyrmont how life-centred planning can help you get the best life possible with the money you have, for you and your kids. Simon is regulated by both the HK Confederation of Insurance Brokers (011833) and the Securities and Futures Commission (BGY807).
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