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!