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Elizabeth Kerr is not subtle when setting up kids for money machine success

Personal Finance
Elizabeth Kerr is not subtle when setting up kids for money machine success

By Elizabeth Kerr

Children are funny aren’t they?

Sometimes in a ‘that’s so cute but please don’t repeat that in front of your Gran’ funny kind of way.

If you have a special little person in your life that you would like to inspire to take the money machine path, rather than jumping into the work-consume-debt-work-die slipstream, then this week’s column is for you.

It starts with YOU

If you’re not interested in your own money machine then children will miss the point. Building a money machine isn’t just something you just do every now and then in secret; it’s a way of life. If you’re not inspired and talking about ways to design a lifestyle which allows you to save most of your income, then they won’t be either.  

And there you have the first clue for your kids' success.

Mark Twain famously said: “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” Put that on their bedroom wall!!!

Building a Money Machine involves being different from everyone else. Therefore one of our jobs as parents in this area is to make being different “cool” and something that inspires confidence not shame. We need to keep an eye out for those moments as they grow and seize them as opportunities to build their confidence and resilience for being true to the money machine ways which might be at odds with what their peers are doing.

Ditch the 10% rule

My personal pet-hate is that damned 10% rule. The traditional recommendation for tithing seems to have been confused with that for retirement. “Save 10% and they will have enough for retirement” we tell them. @WRONG!”

If they save just 10% of their income they will be working for 51.4 years before their money machine will be ready. This number needs to be closer to 50% and if you start that right at the beginning of their earning lives it will be easier to keep up the habit as they get older.

If they earn just $20 a fortnight feeding the neighbours cats and end up with only $5 for themselves, don’t feel sorry for them and relax the rules until they start to earn more. That lie is one people still use in their 20s and 30s if not held accountable earlier.

No, start as you mean for them to go on: 50% Money Machine, 30/40% non-negotiable needs and 10/20% theirs to spend however.

If they aren’t really getting much money then maybe those splits will inspire them to be more creative about how they can make more. Adding to their money machine needs to feel like a non-negotiable part of their working lives from the start to have the biggest impact later on as their earnings increase.

It takes a village…

Make the effort to find individuals, mentors, families who are successful and demonstrate the virtues that you would like your children to learn. But don’t just stop there – set them up on a date with these people. Tell those adults what you like about them and how you are talking to your kids about their money machines; and get them to talk about their journeys and lessons to your kids as well. You want your kids to see beyond the car they drive or the clothes they wear and understand the virtues that have gone into creating that lifestyle design and success. These conversations need to be actively orchestrated in order to be louder than the magazines and celebrity sports people selling your kids products which only serve to ensconce them in the work, debt, work and die lifestyle.

Don’t leave it to the Banks

When it comes to talking money, debt and credit cards this conversation is usually facilitated by banks, who lets face it have an ulterior motive to sell both of these facilities to our kids and keep them as customers for their entire lives.  

If you’re shopping around for big-ticket items you can talk to them about the various ways of paying for them. For example you are shopping for a new pushbike. Ask your kids to help you find one which they think would be the best value for your money.  Discuss how many working hours it would take for you to actually buy one. When a sales assistant comes over demonstrate some haggling skills by asking for their “best price”, what extras they could throw and if they will discount for cash.  

These conversations need to start early. It doesn’t matter what you are purchasing, just as long as you can hunt down a few opportunities to discuss the different buying options and get them talk to you about what they think would be the best use of money.

Working is not just for adults!

Why not start a small business together? Trade Me is great for this kind of thing. Is there something that they do really well or enjoy – like art or photography that they could sell? If you’re handy on the paintbrush maybe up cycle some old furniture and get them to list it and monitor the sale. As well as learning great skills in marketing, time management and customer service it is a great way to ignite a passion for running their own business.

Let them decide how the profits should be divided between the following categories:

1. Reinvesting into more business supplies,

2. Spending for themselves,

3. Money Machine Investment and

4. Giving to charity.

Seed Money

If starting a business is not your thing you could offer some seed money and tell them they have to make it grow and decide their own Safe Withdrawal Rate so that it never runs out.

In my opinion the richest kids on the block aren’t the ones who have the most money, it’s the ones who can take their oily rag and use it to get exactly what they want. They know that life is for living, not for spending, and they are confident in their own lifestyle design choices and how those affect their money machine.

So with this in mind, show them the values and benefits of building a money machine by demonstrating them in your own behaviour, talk about money, debt and business ideas and shamelessly orchestrate light bulb moments for learning.   After that – just relax!

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You're not supposed to _save_ the 10%, you're supposed to _invest_ the 10%, in something secure.
And it's not for retirement.
The "save" and "retirement" are modern corruptions.


What is it for then?


The #1 point of it... to learn to live within your income.

secondly, the future may hand you opportunities, like deposit for your home or dowry, or the initial funds to get your masters tools/equipment to open business...all the stuff that such an investment would take literally years of savings yet be the foundation stone for the rest of your life.


That 10% rule to save/invest is the minimum. There is always times in your life when that is the smallest amount but more is always better. Apart from that your comments are very good.


I would hazard a guess that most people don't even reach 10% the majority of the time.


I would be interested in people's comments about whether its a good idea setting up a savings account for your offspring and drip feed money into these accounts slowly over the years. Personally, I was thinking more in line with trying to pay down mortgage/invest money rather than doing this. Thoughts?


I get this question all the time and my short answer is : Sure, if you have a money machine already, or you are happy with your projection for achieving one, and you have leftover money - then sure why not? The power of time and compounding interest will be a phenomenal advantage.

The long answer starts to sound a bit like the below:

But I don't think giving your children money will make them better off over the long term if they can't differentiate between needs & wants and embrace delay or manage their consumerist emotions. After their inheritance they will likely revert back to their old spending baseline. Twin and adoption studies support this.

Some would argue using the money for education will directly change their futures. This falls very much into the "it depends" category for me. The same would be if they used it to purchase a house... again it depends. If it brings you joy to have paid those things for your children then you could do that.

If you do have a money machine then theoretically you could pass it onto them when you kick the bucket, so that way you hit two birds with one stone by boosting your own MM and giving to your kids (eventually).

Also, you need to weigh it up against the intangible opportunity cost of not giving them money and investing in your own MM enabling you to stop working sooner (or make a lifestyle/career change), therefore being able to spend more time with them. We all know "time" is where the value is when it comes to relationships. AND lets not forget the benefits of teaching them to achieve their own financial goals by leaving it up to them to get on with it. Sometimes making life too cushy means the financial lessons are learned to late to be of any benefit.

So it's not a clear yes/no answer from me. It depends on how old your kids are and where you are at in your own MM journey.

(just a wee reminder i'm not a financial adviser, i'm just opinionated so seek formal advice if making any financial changes)

If you (or anyone) want to email me with a specific question fire away to


Often the MM passed to the kids doesn't work well (they didn't set it up, or worse only understand the setting up process so they never understand how to develop the businesses itself, it's a constant in their lives). But often that leads to the "my parents want me to operate the farm/shop/business when I'm older but they just don't get "me", I don't like that stuff. Ahhh the diminishing return of success


the results of a recent survey done by a US employment agency crossed by desk yesterday.
It had some top quotes from the comments.

One I think is important regarding finance:
"My biggest regret was setting up a Trust fund for my children. While it was important that they have the funding to attend a university with a good reputation, it was terrible that it taught them to live beyond the means of what they earned through their own efforts."

This is also why I dislike socialism. Recently another person said "Socialists are the ones who turn up while you're shifting and will lend a hand and have a cuppa tea and a bikkie:.
This is right, they turn up, complain about having a bad back and have tea and a bikkie. They never bring the bikkies themselves as their bad back always prevents them from working but they'll always turn up.

Like the trust fund they get used to the comfort of living beyond their means and when the hat goes around they never have enough left to contribute to the pool. Because they've never had to learn to live within their means (and thus the importance of expand their (and others)) means!)


A friends daughter who is at Uni regularly rants at her parents expecting them to 'cough up' money for overseas trips, etc. and then gets annoyed (and sulks) when they can't. She is not interested in working to finance it herself as this interferes with 'her' social time. My daughter who is still at school, works in the school tuck-shop and earns a few dollars every day and saves this (I've explained the difference between wants and needs after she wanted a flash designer bag to replace a perfectly serviceable one she currently had - it took all of one weekend to articulate this bit of information as she had issues grasping the concept). Over the course of twelve months at age 14 she has managed to put away $750 - including birthday and Christmas money and she chooses charities she wants to help out and pays that out of the money she earns (I never suggested this, but she watches me donate and I've explained why I do this). She sees her total amount earn interest (which compounds) and realises the work/effort which has gone into accumulating this, so she can't be bothered (any longer) with flash bags, designer brands, etc. She thinks the Uni student who expects her parents to pay for her overseas jaunt is a "spoilt brat" (her words). I believe it's key to start explaining things to kids (from day 1) for financial success but if the parents themselves (have no financial smarts) there is little hope for their children. I was brought up by my grandmother in a small leaky shack and we didn't have much but we gardened, bartered the surplus and managed to exist (I was always told education is the way out of this life when I was young -it certainly was for me), I've made sure I've shared my early 'experiences' with my kids and told them others in 'life' are not so fortunate and they should make the best out of every opportunity they are given and never take anything for granted. The result so far - two kids who are responsible, mature and far wiser than many their age...


:) Well said.


"It takes a village..."