How to help your children gain a financial-freedom mindset

30 January by Matt Wenborn in Financial Planning, Financial Literacy

How to help your children gain a financial-freedom mindset

The lessons you teach them now can significantly impact your children once they leave home, writes Lifetime financial adviser Matt Wenborn.

OPINION:  Five years into a 20-year study tracking Kiwis’ financial knowledge, researchers* have found nearly half the participants had learned “everything” or “almost everything” from their parents.

It seems most financial literary starts largely at home, and it’s important that the topic of money shouldn’t be shielded from our children. Instead, we should be giving our kids a head start in life by demystifying vital financial concepts so they can grow into money-savvy adults.

Here are five key suggestions to help raise financial independent children.

Delayed gratification

Kids and adults alike learn from experience. Test your child’s willpower by offering a treat tonight versus the offer of double tomorrow. This shows the power of delaying instant gratification for the greater good. The implied lesson being saving and the power of compounding interest. In this day and age with fierce targeted marketing and advertising directed squarely at our children, our children need a strong will to keep instant gratification and the marketers at bay. Practice makes perfect.

Say no to bail-outs

When your child doesn’t meet their saving goal for the latest toy or gadget, never bail them out by topping up the shortfall. If you’re always waiting in the wings to help them when the going gets tough, they are less likely to become truly independent adults.  

As hard as it may be at the time, know you’re helping them in the long-run by reinforcing the discipline and grit needed to meet financial goals.

Don’t be a “fake teacher”

When it comes to money, you need to walk the talk. Children, as the old adage goes, learn from what they see you do rather than what you tell them to do. Practice good financial management at home, and invest in growing your own financial knowledge. Share these learnings with your children and take an active role as a parent in their financial literacy. Know your limits though – you can’t expect be an expert on everything. Seek advice from professionals where needed.

Get them involved

Consider including your children in the household finances from a young age. Start by explaining incomes and outgoings, budgets, assets and liabilities, fixed and variable costs and how cash flow interacts with these concepts. A good way to start is giving your children a list and budget to work between at the supermarket. Maybe an incentive to get the groceries under budget – you will be surprised how practical children can be.    

In doing so, you’re giving your children a real-world way to truly bring big financial concepts home.

Show them the perks of saving

Your children may not see the appeal of saving, that is, until they experience the reward of goal setting for themselves. Help your children set short, medium and long-term goals over a six-week, three-to-six-month and one-year period respectively – and attach each goal to a reward that’s meaningful to them.

Getting your children to physically save is important. Don’t hold on to their savings for them;  get them to make the transfer into whatever suitable investment strategy is agreed upon. Although it may sound trivial, the repetition of a good practice will slowly turn into routine.

Article by Matt Wenborn - Meet Matt

Matt Wenborn is a Lifetime financial adviser based in Christchurch. He is passionate about helping his clients work towards achieving the future they desire.

* Westpac Massey Financial Education Centre

News alert March the 5th 2021: Three large earthquakes occurred off the coast of NZ. Civil Defence alerts buzzed cellphones around New Zealand warning of a possible tsunami on the East Coast. Updates in media and Civil Defence website were made known and Kiwis around the land in at risk areas responded to the threat.

This week the Government announced a suite of new policy with the intent to assist first home buyers into the market. This included tax changes for investors, bright-line extensions and increases to the cap on First Home Loans and First Home Grants.