Crayon Conversations: Raising Financially Responsible Kids
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In this conversation, Laurel Makowem, the founder of Mothers Teaching Money, shares how we can raise our children to be financially confident, empowered and independent adults. Laurel is a Certified Financial Education Instructor, Holistic Financial Planning Coach and Financial Literacy Advocate.
This conversation has been edited for length and clarity. Watch the original recording here.
Steph: Laurel, can you start by sharing why you founded Mothers Teaching Money?
I grew up not learning about money. My environment taught me that because I am a girl, I couldn’t earn well or invest. When my child was about eight - he’s turning eighteen next month - I realised that I couldn't teach him about money. That wasn’t a great feeling. I also reflected on how my lack of knowledge and financial education had been obstacles in my journey.
I dived straight into a six-week investing course! I didn’t have a clue what was going on, but I persevered. I started talking to friends and family about this, and so many of them felt the same way. My son and I started sharing our general education journey, which turned into a business. There are a lot of mothers who don't feel confident teaching their children about money because they weren’t taught. If I can do it, everyone can do it.
Steph: What a neat thing to do with your son! The topic of this talk is financial confidence - what does this look like?
If I use myself as an example, I had no financial confidence until ten years ago, which affected my overall confidence. I can see now how many opportunities I missed because of this. Financial confidence is a relatively new concept, and if you Google it, there really isn’t one definition. For me, financial confidence is the belief deep down that you’re capable of grabbing opportunities and having good outcomes, and you trust yourself to make good financial choices.
Steph: Can you give an example of how this plays out in practice?
Previously, I would always accept the salary or wage I was offered. Even when I didn’t feel good about it, I was too fearful to speak up, ask or say, “I'm worth more.” Now, I have no problem saying, “This is what I'm worth.”
Another big one I’ve noticed is that many people, especially women, don’t feel like they can be involved in social conversations that involve investing and the economy. A lack of financial confidence leads people to move away from the conversation, whereas someone who is financially confident will engage.
Steph: Mindset plays a big role in money - can you run us how you define mindset?
What we do starts with how we think. Our money mindset determines the choices we make, and this, in turn, determines our financial situation. It's the foundation of our financial reality.
Steph: What's the mindset that you promote?
I call it a “millionaire mindset”. It took me a while to be okay with the word “millionaire” because I grew up with negative associations with that word.
I believe the “millionaire mindset” is already in all of us, but then life gets in the way. It is made up of three mindsets: growth mindset, abundance mindset and investor mindset.
Growth mindset: this is all about learning. You believe your abilities can be developed through dedication and hard work (see Carol Dweck’s work).
Abundance mindset: you believe there are enough resources in the world. A beautiful affirmation that I teach parents is that every time you spend, say in your mind, “There is more where that came from.”
Investor mindset: we are all consumers, but many of us only consume and don't invest. A consumer mindset is where you spend money, and you get the thing. An investor mindset is where you spend money, and you think, “How can that thing make more money?”
Steph: If you’re a parent who’s not confident with money, but you want to teach your child good habits, how can you start?
Start by educating yourself because if you have no education, it’s hard to educate your child. When I first started learning about money, I would set a daily alarm and spend 10 minutes a day reading an article or a book, looking at the business news, or listening to a podcast. You only need to be a few steps ahead of your child. Becoming good with money requires daily consistent practice. But as they say, “Knowledge is power.”
Three great websites in New Zealand are Sorted (government website), Sharesies and Hatch [and Crayon!].
Here’s another exercise I do with parents: imagine your child at 30 years old. What do you want their financial lives to look like? Do you want them to be living paycheck to paycheck and struggling? Do you want them to have credit card debt? What are you doing to ensure your child doesn't get into these situations? What is it you really want for them? And then work in baby steps. Just start educating yourself and then start sharing that knowledge.
Steph: Let’s talk ages and stages - what do you recommend parents teach and when?
Compound interest: It changes everything if we can get our children excited by compound interest. Saving isn't fun, especially when a child can’t even think past this afternoon! Older children and adults have so much pressure to spend and not save. You want your child to realise that their money can make money for them without them actually needing to work but only if they leave it to grow.
I use the compound interest fairy, which is just like the tooth fairy that visits most homes! Use a clear savings jar and if your child leaves their money in there, let the compound interest fairy visit your home. Even if it’s just with coins, the connection you want your child to make is that if they leave the money alone, it’s going to get bigger. Little children need to see that it's going to grow.
You can start this whenever you think your child is ready to grasp this concept. If they can understand the tooth fairy, then they can understand this! In terms of frequency, that’s very individual. You want to make sure your child doesn’t lose interest. Weekly, or even every couple of days, can be a good place to start.
For older children, use a compound interest calculator. Get them to put in different amounts, frequencies and interest rates to see what happens. Also, ask them this question: if you were given a magical penny that doubled every day for 31 days or $1 million, which would you choose? The magical penny would be worth over $10 million by the end of 31 days!
Needs versus wants: Help kids understand that money goes to needs first, and then it flows to wants. Wants are beautiful, and they must be celebrated, but it's all about finding that balance. One jingle I do with younger kids is: “We work, we earn, we save, we spend.” What work are you going to do to earn the money? How are you going to save it? And then you can spend it.
Another fun thing to do is ask each family member to bring one thing to the table that they thought was a “need” but turned out to be a “want”. So many of us think we need all these things that never end up getting used. Share why you thought it was a “need”, and have a laugh about it.
[Side note from Steph: here’s another neat way to teach this - one financial academic shared that her child really wanted a pair of top-of-the-line sports shoes costing $120. The mother told her child she’d pay for the average model costing $80 (a ”need”), and her child could work and save an extra $40 for the more expensive pair (a “want”).]
Budget: A budget is a plan for your money. If you're not planning where your money is going, it will just go. Even as adults, many of us really do wonder where it went. It took me a long time to find a budgeting method that works for me. But my view has always been that if I don't do it, how can I expect my child to do it?
It's not easy to start budgeting. It can be really overwhelming and confronting, so acknowledge that upfront. There's no easy fix here, so expect the obstacles and expect to put in the work. Involve your child, age-appropriately of course, in family budgeting, such as a birthday party or a holiday. Work together as a family to save up. For example, perhaps your child could do dog walking to contribute more.
They are the three key concepts. If you want to learn more, here’s a summary with more concepts at each age.
Steph: 1 in 3 Kiwis rarely or never talk about money with anyone. So how can you start?
Start where you’re comfortable with your children. And make it fun. Ask questions such as:
What would you do if $100 blew in the window?
What would happen if all our money was sucked into a chocolate river today and we couldn't pay for electricity?
Start talking about it with your child, and at the same time, do your 10 minutes a day of financial education. Then start talking about it with someone you trust. For example, you can start with something general, such as a recent article on interest rates. Once you start building your financial confidence, it will be so much easier to go out and talk with people about it.
Steph: If parents want to explore this topic further, what resources can you recommend?
My business is Mothers Teaching Money. I recently changed my Instagram handle to Teach Girls Money because there are still many gaps between women and men when it comes to money. I feel very passionate about being part of the movement on financial empowerment for women. My business has tools to help mothers teach their kids about money with activity books for younger kids and a parents’ guide - they’re a good way to start talking about money!
Steph: Thank you for joining us Laurel!
Now for the important legal part: Investing involves risk. You aren’t guaranteed to make money and you might lose the money you start with. The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 13 December 2022.
Laurel Makowem
Founder, Mothers Teaching Money
Stephanie Pow
Founder and CEO, Crayon
