In this week’s blog we have teamed up with our friend and the founder of Blue Trees Savings, Will Rainey to bring you a blog on the subject of teaching your children about money.
Over to you, Will….
I’ve now been writing blogs to help parents teach their kids about money for over 2 years (80+ blogs). I thought now would be a good time to reflect on these and to summarise the key messages shared.
My mission is to help parents teach their kids to save rather than just spend. Our kids will naturally learn that money is used for spending but they need to be taught about the other ‘uses of money’ (saving and growing).
Habits are the key to financial success
Without guidance our kids are more than likely to form poor money habits. It is critical that parents help their kids form good money habits as the money habits they form will determine their future financial wellbeing.
To help I have set out three top money habits that I believe will make a massive difference to a kid’s future financial wellbeing: (3 habits blog)
- Save at least 10% of all the money they receive for the long-term
- Save up for something they really want
- Record how much money they have each month
If they don’t save then they could end up following the same path as Elsa from Frozen and believing in the FAKE Wealth Formula (blog).
Help their money grow
The first habit of saving for the long-term helps kids realise that to build wealth they need to save money to make money (blog). Most people do this via earning interest from a bank account, however, I want to help parents to start investing for their kids. Investing can be simple if you keep it simple and ignore the headlines as set out in this blog. Also, if parents do invest for their kids, they can invest in a fund which will help make the world our kids will inherit a better place to live in (blog).
Give pocket money
In order for kids to form these habits they need some money to manage. I therefore encourage all parents to give their kids some pocket money (even if it is just a small amount). Pocket money is the most underrated financial education tool there is (blog).
Support your kids to learn about money using trees
When talking to my daughters about money I want them to visualise their savings in the future. Therefore I show them their savings (which are invested) as Blue Trees. Each time they save, they see their Blue Tree forest grow. I do this as I strongly believe that parents should be showing their kids what they have been saving for them #SaveAndTell. If kids don’t take ownership of their savings then it could lead to those savings having a negative impact on their future financial wellbeing (blog).
In subsequent blogs I have expanded the Blue Tree concept to help explain different money related topics. These include:
- Budgeting: Building a moat around your Blue Tree forest to protect from unnecessary spending (blog)
- Pensions: A hidden Blue Tree forest where magical multiplying trolls can help (blog)
- Credit Cards: Rather than Blue Trees, credit cards are planting dangerous Red Trees which grow super fast and can ruin the chance of ever growing a beautiful Blue Tree forest. (blog)
Enable them to earn and keep money
Two other important areas to help kids learn about money are:
- Earning money - I would encourage parents to talk to their kids about being an entrepreneur. You never know, your kids might have a special entrepreneurial talent like Harry (blog).
- Getting rich quick - our kids need to understand there is no short cut to becoming wealthy. They need to work hard and / or be smart. They need to know to say “if something sounds to good to be true, then it probably is!” (blog).
Most kids don’t learn about how to manage money (an essential life skill) at school and as a result money is one of the key reasons many young adults suffer from stress (and all the mental health implications of stress). The responsibility is therefore on us as parents to teach our kids and ensure they pick up good money habits.
Thank you for reading!
WillWe will be bringing you more of Will’s amazing blogs in the coming months but you can also check out his website.