Hey a huge well done to you! Yes YOU!
At some point in the more recent past you thought you would be bold and take control of your money. What was one of the ways you went about it? Yep, you let NZHL help you by giving you the tools to pay down your mortgage quickly, hence the fact you are sitting down, hopefully somewhere comfy, reading this blog.
But, how long did you struggle along with a mortgage before you put your hand up and said “ah, excuse me, I need a bit of help over here”! How old were you? 20, 40, 60? At what point did you work it out that in order to get this sucker paid off you need to take a few lessons in budgeting, frugalism and how to avoid paying enormous amounts of interest?
What if someone took you aside and had a word in your ear on a regular basis from when you were a toddler instead and you learned the “how to be good with money” lessons much earlier on in life? Could you have avoided all the pitfalls that sucked up a lot of your cash instead? My guess is that you probably could not have avoided them all, but you could have avoided quite a few of them.
Being a blogger and a podcaster I come across a lot of people and they tell me about their journey with money. Every story is complex and each is inspiring but all of them have two distinct differences:
Those with family who talked to them about money when they were children
Those with family who did not
Watching and listening to these people I have come to realise that those in the first category succeed with money from an early age and those in the second category either never succeed OR they work out some good behaviours and strategies but much much later in life. Unfortunately I was definitely the latter and then when I discovered the 8th Wonder of the World, Compound Interest...I was a bit p***ed off if I’m honest! I had missed out on so so much by starting late!
I didn’t want my daughter to have such a slow start to working out how to use money and I wanted to make things easier for my daughter from as early on as possible. Therefore, as she develops, so do our conversations around money.
As I grew up money was often tight and I remember the fear associated with this. I recall overhearing my parents trying to work out how to pay their bills, including the large food bill for a family of seven. I will always remember how worried they often were. I don’t want that for my child so on a weekly basis money is discussed at any time that it is appropriate so she can learn how money plays a daily role in our lives. It started with the simple stuff, just going to the supermarket and selecting an item that was on sale. Then to the toy store where she was allowed to choose one thing, not the ten things she wanted because of the price that ALL of the items would cost. Then later on when a birthday came along and she wanted to do $1,000 (!) worth of activities with her mates we sat down at a computer and costed out her wish list and culled (90%) things accordingly. As she got older I tell her how much her parents earn, how much we have to pay each week to the government in tax, why we even pay tax, how much the groceries cost and simple things like rates on our house each week and the fact we put money into our savings every single week. Her piano lesson costs $20 each week so I tell her that I earn $22 per hour in my part time job, so it takes me an hour of my time to pay for her activity. If I have just filled up the tank with gas, I tell her what it cost me and how much I saved using a discount coupon. If I’m at my computer and she wanders past I show her my spreadsheet of investments, expenses and earnings. At which point she yawns...
Each of these conversations give her an indication of what a fair amount to pay is, what money comes into our house and what goes out. I’m showing her that money is not some mysterious part of our life that JUST HAPPENS, it is something we actively control. And the big difference between her upbringing and mine is that we control our money, it does not control us. You need to think about it and talk about it if you are going to be successful with it.
Nine years of discussions here and there around money came to a head in May when she decided that she wanted to organise a night away with her Aunty in Wanaka, an hour from our house. Wanaka is an expensive place! Could she not have chosen Roxburgh instead? Apparently they don’t have a chocolate shop… Expensive holidays don’t just happen, you have to plan them so together, but driven by her, she wrote down everything she wanted to do to make this the “best weekend eva”! And because we have taught her that money doesn't grow on trees she carefully thought about each activity, researched entry fees online and found many fun things that they could do for free. I was so proud of her. Her portion of the trip ended up costing $151 and her Aunty $155. Where does a nine year old get that sort of coin? I helped her out with her portion of the hotel and she worked for the rest. She sold paintings to her grandparents, she made jam and sold it to the neighbours, she did extra jobs around the house until she had scraped together enough. It took her many many months.
And man did she enjoy that trip! There were no unexpected surprises that she had not budgeted for and she got a thrill out of whipping out her purse and buying her Aunty a coffee. And it showed her that she put A WHOLE LOT of effort into earning money, planning the event and then “poof” it was all gone in a weekend. This is a valuable lesson in showing that money is hard to earn but extremely easy to spend. Despite this it didn’t detract from the fun they had and it was indeed “the best weekend ever Mum”!
If you have children make sure you include them in conversations about money from the get go. There is no right time to do it, no formal sit down is involved, just grab the opportunities as they pop up. By showing them the incomings and outgoings from your household they get such a good understanding of how to balance money in their lives and realise that money is not just something that pops out of a cash machine, there are a whole lot of complex things going on in the background.
And if YOU need to be reminded of the futility of paying enormous sums of interest over the life of a mortgage then explain to your kid how mortgage interest actually works. Or if you really want to freak them out, discuss the interest rate on an overdue credit card. I did, while driving to school with my daughter when she was nine and the conversation was hilarious. “But Mum, NO WAY am I going to pay you back MORE than what you lent me. That’s stupid, why would I do that, that’s stealing, the bank is robbing you Mum…!”
When you have to explain things to a young child or young adult it actually makes you question why you do some of the things you do with your own money. We are forever learning and its fun to have a giggle with your kids while you do it.
Happy Saving!
Ruth
The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans (NZHL).