11 Financial Experts Answer: One thing they wish they had known about money as a kid!
I asked some leading UK financial experts “What’s the one thing you wish you had known about money as a kid?”.
I had no idea what responses I would get back as there is such a wide range of possible money related topics. In fact, Helen Westwood, the '2019 Moneywise Personal Finance Teacher of the Year’, actually made the point that just knowing about the wide range would have been her one wish:
“The one thing I wish I had known about money as a kid is how much there is to know and how many areas of our lives that money can have an impact on (both in a positive & negative way)”
With there being so many different money related topics, where do we start? Firstly, reset any bad habits We risk our kids picking up bad money habits from a young age which then need to be unwound. This is perfectly summed up by Andy Hart (founder of Maven Adviser and host of the Maven Money Podcast) when he said:
“The one thing I wish I had known about money as a kid was that everything I knew at the time was wrong”.
This is why parental input and guidance is so important.
It’s not just about how much money you earn One of the most common mistakes we pick up as kids is the view that people who earn lots of money are therefore wealthy and happy. Two experts said they wish they had known, as kids, that when trying to build wealth and be happy it’s not just about how much money you earn. Jason Butler (Head of Financial Education at Salary Finance and ‘the Wealthman’ columnist for the Financial Times) said this about wealth:
“It doesn’t matter how much you earn. If you can’t control your spending and save a bit each month, you’ll never build financial wealth.”
"I wish I'd known that Mr Micawber (from Charles Dickens’ book David Copperfield) really had worked out the recipe for happiness: "Annual income twenty pounds, annual expenditure nineteen .... result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
The concept of spending less than you earn is what we at Blue Tree call the ‘Real Wealth Formula’. To learn how to teach your kids this lesson here is a blog to help.
Get the right balance When talking about money it is easy for kids to see it in a binary way. You either spend money or you save it. The reality is that you need the right balance. Jane Goodland (Corporate Affairs Director at Quilter plc and KickStart Money lead) set this out well when she said:
“I started my first part-time job when I was 13...it was on a market stall selling wicker baskets for a few hours every Sunday morning. It was great for my arithmetic and I always had a part-time job after that which gave me cash in my pocket but the one thing I wish I had known was the power of compound interest...if only I had saved more back then, instead of spending it all on baskets!!”
We don’t have to wait until our kids have part-time jobs before they can learn about delayed gratification by saving. This is a lesson Robert Gardner (Co-founder of financial education company RedStart and author of the amazing book Save Your Acorns) wish he had been taught as a kid:
“One thing I wish I had known about money as a (primary school) kid is how to trade off buying sweets today versus saving to buy a toy I really wanted - like lego!”
Balance risk and return It’s not just about getting the right balance in terms of saving versus spending. When it comes to money there is also the need to get the right balance in terms of the risks we take and the return we get from taking these risks. Helen Driver (Founder of the interactive online financial education platform MoneyReady) said:
“The one thing I wish I'd known more about as a kid was (having) a better understanding of risk. As kids we are often told not to take risks, to minimise risks: don't climb that ladder, don’t jump off that ledge, we are even encouraged to pursue a 'secure' career path. However, in adult life, whether it be in relation to money, work, or everyday decision making, we are constantly required to balance risk and return.”
I love this one. We all want to protect our kids and therefore take many decisions on their behalf. The key is to find ways so they can learn to trade-off the risks versus rewards themselves. As Helen says, this won’t only help them in terms of money but also in terms of other aspects of our kids’ lives. Make money work for you Developing a savings mindset was a key theme shared by a lot of our experts, but they went beyond just this: As Tynah Matembe (co-founder and CEO of Money MatiX) says:
“I wish I had known as a kid that even with my very first penny I had the opportunity to make money start working for me.”
This is a great point. We all quickly learn that we have to work to earn money. We then miss out on the other side of money which is that it can work for us. This is why I believe that we should help our kids, no matter how young, set aside at least 10% of all the money they receive to be saved for the long-term. This will allow them to witness that they can save money to make money. More specifically .. make money work for you by investing One of the best ways to help kids witness that they can use money to make money is to invest their savings. Investing, however, is not something most of us learnt as kids. Moira O’Neill (Head of Personal Finance at Interactive Investor and regular writer for FT Money) said:
“I wish I'd been taught that the stock market is not boring. I was very into the arts and only became interested in investing when forced to - when I aimed for a journalism career and landed a job in financial journalism.”
“One thing I wish I had known about money as a (secondary school) kid is about investing, and stocks and shares. I wish there had been more share trading games/competitions at school to complement starting a company (I did Young Enterprise in 1996/97)”
I totally agree. I wish I had learnt about the stock market as a kid and started investing from a young age. For those of you that want to introduce your kids to the topic then please read my blogs ‘How to teach your kids about: the Stock Market’ [Part 1 - Overview | Part 2 - Picking companies] Don’t be fooled It’s not just about saving and investing that our experts wish they had known about as kids, it’s also being told about the potential dangers associated with money. Nick Clegg (Director of Hampshire Financial Planning Ltd) said he wish he had known:
“The bank isn’t being your best friend when they offer to lend you money.”
This is super important. When we are growing up we might borrow a bit of money from our parents. This can lead us to have good feelings towards those companies that lend us money which is a mistake as Nick highlights. We need our kids to understand that those who lend us money are looking to make money for themselves! This is why I have talked to my kids about credit cards even though they are still young. It’s not about them knowing all the details about credit cards, it’s about making sure they have a cautious impression of credit as they grow up. For more information on teaching your kids about credit cards please read this blog. Make sure your money has a purpose A big question that people ask is, “Does money make you happy?”. I strongly believe that Dan Haylett’s (Financial Life Planner at TFP Financial Planning Ltd) wish as a kid goes some way to answering this question:
“If you earn money by doing something you love to do then you will find the true meaning of money. It’s not about how much you earn, it’s about how you earn it and what you do with it.”
I believe that people who earn money by doing something they love and/or find purpose are more likely to be happy than those just working for more money (all else being equal). Also, those that use their money to do the things they love, or to help others, are more likely to be happy than those just spending money on material goods (again, all else being equal). This point about having a purpose both in terms of how your earn and how your spend is something most kids don’t get to learn or appreciate and therefore something we, as parents, should be talking to them about. Summary These are some amazing lessons from our financial experts which I too wish I had known as a kid:
Reset any bad habits
It’s not just about how much money you earn
Get the right balance (between spending and saving)
Balance risk and return
Make money work for you (and invest!)
Don’t be fooled by dangers (such as loans and credit)
Make sure your money has a purpose
Now is the chance for you, as parents, to proactively help your kids learn these important lessons and give them a massive head start in life when it comes to their financial wellbeing. To help you start these conversations with your kids, I have written a series of blogs that focus on different money related topics. These blogs are designed to give you the knowledge and confidence to talk to your kids about these subjects in an engaging way. Topics covered so far:
Exciting pensions - coming soon! (subscribe so you don't miss it!)
Thank you for reading and a big thank you to all the financial experts who kindly took the time to respond to my request for their valuable views!