It's such a powerful word. We can't have everything we want to buy in life and nor should they.
When you use that word in relation to spending, you're in the middle of a teachable moment.
But it must be accompanied with an explanation better than simply "we can't afford it", even if that's the case.
The more you can explain, the better. Sometimes I'll say, "I'll pay half if you save up for the other half".
If you are paying half or another percentage it gives you an opening to discuss whether it's an appropriate use of your child's savings. It's a defacto veto as well, if you know they won't buy it without your contribution.
2. Give them budgets
Children grow and learn by experience and handling their own money helps hugely in that process.
With a budget they learn that the supply of money is finite and what goes out can't be more than comes in forever.
They can also learn goal-setting if they decide to manage their money to save for something.
Budgets are a winner because children love the freedom of making their own choices.
They also learn consequences when their supply of money runs out.
I feel that lending to children, even if they simply don't have cash when they're out, sets a bad example.
3. Talk to the them about the world of money
Explain how bank accounts work, how savings grow, how much you spend and what you value spending money on. Was it value for money?
Talk about the cost of your electricity bill, the choices you have to make when deciding whether to buy X, Y or Z, why you live in the house you do, and how much you will need to save by retirement to top up your superannuation.
If you have credit card or other debt, explain how much you pay in interest and why.
When their KiwiSaver statements arrive, talk about investment growth and compounding. Discuss how insurance works and why you have it.
4. Teach them that money is earned
Children often think money comes out of a cash machine.
Talk to them about how many hours you work each week just to pay for the food on the table and other household expenses.
The sooner they can earn money themselves and experience this first-hand the better.
There is a difficult issue around whether their pocket money comes as a right of being in the family or they have to work for it.
If it's a right they may grow up feeling entitled.
If they have to do chores for their pocket money they might ask how much for every job and not pull their weight as a member of the family.
Whichever way you go make sure they have a budget and know that blowing the budget at the beginning of the month or term comes with consequences.
5. Show them how savings work
Set up a current account, medium- and long-term savings accounts.
The current account is for small things such as toys, while medium-term savings are for larger items or experiences.
Get them in the habit of transferring or depositing a regular amount to the medium- and long-term savings and, if you feel it's appropriate, charity as well.
The long-term account could be KiwiSaver, which doesn't have to be with your bank.
They will be able to withdraw it for their first home, which isn't like waiting for retirement and gives them something to aim for. Regular saving teaches patience and the fact that, little by little, savings add up to a decent sum of money fast.
Ten per cent of their money into KiwiSaver is a good starting point.
6. Set a good example yourself
Do you want your children to see healthy or unhealthy examples of how to earn, spend, save and think about money?
Most children will replicate what they grew up with. If you set good money examples they have a better chance of taking that right turn when they leave home.
Remember the financial seeds you plant with your children will grow over time.
The ultimate goal is for them to fly the nest and live independently, not keep returning with their hand out.
