Save your money for big purchases

Keryn Jarvis – Business Advisory Services associate – Baker Tilly Staples Rodway Tauranga

My six-year-old Jacob is boat mad. He’s wanted to buy a boat since he was about three. I’m currently teaching Jacob about needing to save your money for big purchases such as a boat or a house. We recently went to ANZ to bank his life savings into a Serious Saver account. Each month we now log into internet banking to see how much interest he earned on his deposit and what his balance has grown to. If I can teach him early about compounding interest and making your money grow faster by investing, then maybe when he is old enough, he can buy his dream boat!

It's important to teach kids about both physical money and digital currency

Daniel Merckle – Tax director – Baker Tilly Staples Rodway Auckland

While brainstorming Christmas gifts one year with our son (who was six years old at the time), he suggested that we get him his own credit card. We laughed and asked why he would like a card. He replied, so that he could buy unlimited things.

In the modern digital world, it is so important to teach kids about both physical money and digital currency – that although the money might take a digital form, it still represents “real” value. Our son’s request started a more intentional, broader approach to teaching our kids the foundational basics of what money is, what it does, where it can be stored, how it can be earned, and different ways it can be spent. 

We try to incorporate lessons into different aspects of life; whether that is sometimes using cash for purchases and letting the kids hand it over and receive the change; or adding to story lines while playing. That particular Christmas our daughter received a play kitchen; both kids loved to “pretend cook” and take orders. We made them an order pad and soon their pretend café was launched. At the end of a meal, a bill was presented. The kids used their toy cash register to add up the items and take payment – both cash and card were accepted. It was a fun way to incorporate money lessons into play time.

Our kids are still young, but we are trying to teach them foundational financial skills so that as they grow, they will be able to make their money work for them. It is all about balance; spending, saving and sharing.

We set up shares accounts   

Daimon Stewart – Business Advisory Services managing director – Baker Tilly Staples Rodway Taranaki

We set up shares accounts for our boys (aged 13 and 15). We tip in some pocket money monthly for them to invest. It gives them an idea of investment, how the sharemarket works, what dividends are and how you can make dollars work for you!

I think it’s been beneficial as they get excited about the $1.00 dividend they’ve received and about the gains they’re making. Overhearing discussions about who’s up and who’s down in the markets and whose “portfolio” is the best is quite cool! Although they blame me for encouraging them to invest in KFC (Restaurant Brands), which has since tanked!

You can only spend money once

Nigel Stratton – Business Advisory Services associate – Baker Tilly Staples Rodway Christchurch

My wife and I met at a young age and made some decisions which have set us up in a relatively good financial position. In hindsight the decision to buy our first home, and then trade up possibly had a greater impact on our current lifestyle than our incomes. Key points of the discussions with my children are:

• The Bank of Mum: As we are becoming a cashless society, it is hard for kids to squirrel away money in a money box and banks are less accessible. Our kids have always picked up loose change and manage to gather some sizeable sums. The problem is that the change is often needed for small events (mufti days, sausage sizzles etc) so the kids deposit their money with the Bank of Mum and Mum uses the loose cash for those events as needed, then adds it to the ledger. Every so often the Bank of Mum is squared up and the amount deposited into the kids’ bank accounts. The kids still have a fair bit of loose change in their possession to spend if they wish (or repay us for something purchased when we were out and about).
• You can only spend money once, then you have to earn more or save up again. Try to avoid buying on a whim and give thought to what you want.
• Don’t judge wealth by appearance. Visible wealth is different to actual wealth. Just because someone has a nice car or big house doesn’t mean they are rich. There is a possibility that the assets are on finance and their debt repayments could be significant. This could lead to stress.
• There are some very wealthy people around and they are normal people (who may not look wealthy).
• Evaluate risks wisely. When we purchased our first home for $170,000 the bank offered us a mortgage of $360,000. On our incomes at the time this seemed ridiculous. In hindsight we could have also bought the house next door and taken double the capital gain and be in a better position. I am not saying we made the wrong decision ─ we were 22 with little life experience and it possibly wasn’t the time for us to own a rental. Hindsight is great but do your research and take calculated risks (we didn’t really have anyone to talk to and navigated this ourselves).
• Put a sum of money away each week as savings. It can be rewarding to watch the bank balance grow over time. Frittering money away weekly may mean you can’t afford a new car or trip. Avoid consumer debt ─ it is easier to save and buy what you want than pay back something you wished you never bought. Or you might put an overseas holiday on finance, but then spend 12 months paying it back.
• Have fun. You need to think about money, but you can’t take it with you. Have goals as to what you want to achieve and work towards them.