By Holly Mackay
It's amazing how much talking about money remains taboo. Impolite. Even vulgar. But if we don’t talk to our kids about one of life’s most important things, we’re simply perpetuating this behaviour when most of us would say that we’d like our kids to have a better relationship with money than we do.
My children are endlessly interested in money
I have a 12-year-old and a 9-year-old, and they both find money fascinating. During lockdown we debated whether footballers should sacrifice their earnings so that the club staff could remain on full wages during furlough. They want to know how much the Prime Minister earns. My daughter has even discussed my will with me (charming, right?) and was tickled pink when I told her that Karl Lagerfeld left his money to a cat. Less amused when I said I might do the same.
I think it’s really important to make a connection between jobs and money. I remember quite vividly asking my daughter at the age of about 5 where she thought money came from. “From the machine at the bank”. But she had no concept of how it got there. No understanding of scarcity. And that it takes a lot to get it there in the first place.
Is paying kids to do chores a good way in?
There are very different schools of thought about pocket money too. Do you link this to jobs? Do we give our children £5 a week on the understanding that they clear the table, empty the dishwasher and clean a car (once in a blue moon)? Or is this devaluing the principle that they help because they just should? The jury’s still out on that one, but it is important to foster some sort of relationship with work and money early on.
Because I run a small business, and sold my first business about 5 years ago, my children are very interested in entrepreneurs. And they make a connection between running a business, making money and owning that business. There are television programmes built on this exact principle. This also means that they have a basic understanding of the stock market.
Junior ISAs as a way to understand money, business and investing
My son was surprisingly excited when I told him that he had a Junior ISA and that, as part of the investment funds I’d put into the ISA, he owned a little bit of the company that made his smartphone.
“What!? You mean I own about 1%!?” I had to disillusion him and explain that in fact he probably owned about one-zillionth. If this particular tech company were a human being, he would own about one cell in its body. Nonetheless he was still excited.
Sibling rivalry is also a good tip. I have Junior ISAs for both my children. Because of nothing other than the fact that I forgot one of their passwords, so could not trade at a point in time, they have different investments in them. And my daughter is doing much better than my son.
Her account was invested in lesser known and more volatile emerging markets which happened to have a good run, and so her account had returned about 25% in a year when my son’s had ‘only’ made about 15%.
He was furious and wanted to know why. We then had a very long discussion about why investing all of his Junior ISA in these more unpredictable markets – which can be very good or very bad! - was not the most sensible, balanced approach.
How to talk to your kids about money
I realise not everyone has children as interested in money as mine, and not everyone finds it as easy to talk about it. So where should you start?
There are lots of guides, videos and even games to play with your kids to get to grips with money. For some fun games, read about Aviva’s money lessons for kids.
If you’re ready to get stuck in, check out Money Advice Service’s full suite of guides.
In our new podcast series, author Holly Mackay talks to Vernon Kay about talking to children about money.
If your kids don’t have JISAs, why not talk to them about your own ISA or Pension?