Imagine for a second that money did grow on trees, and that our personal finances were like a tree full of apples. Typically, in personal finance, too much of the conversation revolves around the apples, not the tree.

We weigh up credit cards to see which will give us the best rewards, check which accounts pay the highest interest, look for the lowest-fee funds. We pick shares and track their ups and downs. But it’s really about growing the apple tree. It’s about sustainability.

Personal finance needs to be about helping that money tree grow for the future. So, how do we teach our kids to have a focus on long-term growth and wellbeing? The new Sorted in Schools programme (sortedinschools.org.nz), run by the Commission for Financial Capability (CFFC), found a number of themes parents can use for inspiring lessons.

Money is for growing

Ask kids and teens what money is for, and you’ll get many answers. Where we need to get to is ‘money is for growing’. Or at least a good part of it needs to be, because our needs tend to increase as we get older. Parents who are investors know this. There should be not just three, but four jam jars for pocket money: spending, saving, giving, and ‘growing’. It’s great if there’s money growing in the background over children’s entire lives. Since some money attitudes are already formed by the age of seven, parents are children’s first educators. When they ask you about your own ‘growing’ jar, you can point to your investments and the returns you might be getting.

A sustainable rule of thumb

‘Spend less than you earn’ is a great place to start. In fact, I prefer ‘Earn more than you spend’. Yet just earning more or saving more isn’t really sustainable. You can still spend all you earn, save for the short term, or get into a cycle of saving, then spending it. After a few years, you’d have nothing to show for it – no growth.

That’s why KiwiSaver and investing beyond KiwiSaver are so key – these are the money trees. So are education, building a business, and many others.

Let them get the idea

How do we equip young Kiwis for a financial future we can’t guess? Money and investing may change, but the principles of managing money will stay the same. That’s the message of the Sorted in Schools programme – it’s the concepts that count. The first lesson you can start with is delayed gratification – learning that even your spending money doesn’t have to be spent all at once. Studies show that children who are able to put things off for a greater reward later tend to be more successful in many areas of adult life. Getting kids into saving and investing early, through investments like KiwiSaver, is much like that – it’s about making good choices now that will bear fruit far into their future.

Keeping the long-term view

The second important lesson is ‘opportunity cost’, or how spending on something today always involves some sort of trade-off with tomorrow, a future good. Investors know about the effects of compound interest over time. Money can snowball because your interest is earning interest. That future good is worth waiting for. This is what investing is all about. The point in not spending now is to take advantage of the potential we have to grow our investments over time. We need a surplus in our budget so we can save or invest to get to a better position. Now, that’s sustainable. Our kids need to know how to manage their money so they can do the many things they’d like to in life. With parents’ help at home and Sorted in Schools at school, kids will head out into the world knowing how to make money work for them, and grow it. Just like a money tree.

Published 28 November 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.