Get Sorted: How to get past piggy banks

Here are some money strategies for your super savvy kids. Photo / iStock

When it comes to teaching kids about managing their money, piggy banks are cute but useless. Young ones drop their money in to that black hole of a slot, can't see their savings growing, and may even have to break it open before they can figure out how much they've put away.

Admittedly the pigs are everywhere, but especially when you get towards the tween and teen years, those banks are better off viewed as a last-century artefact.

So what to do for your super savvy kids? Here are some tips:

1. Coins are still gold.

The kids see us pay with the magic swipe everywhere these days, so money looks like it's on tap with every wave of the card. But by starting purposefully with coins, our little ones get a tangible experience of cash.

2. Jar them to attention.

The alternative to the pigs are clear jam jars, where the kids can see how much they've got. With more than one jar, they can give their money different jobs to do (with help from you, of course). Besides the traditional spending, saving and giving jars, add an entrepreneurial, long-term "growing" fund, and there'll always be money for jam.

3. When it's gone, it's gone.

Our brains process cash differently from digital currency on a card. It's important for kids to learn that when we hand it over for sweets it's completely gone when the goodies have been eaten. When we buy something lasting instead, like Lego, that "wealth" sticks around.

4. Afford everything.

Kids learn from our attitudes towards money and the choices we make with it. And of course they have many (expensive) ideas of their own! Instead of shutting them down with a "We can't afford that" - which leads to feeling deprived - it helps to explain our choices with "We've got much better things to buy" instead. The reality is that we can afford many things over our lifetimes, but we make choices along the way as to what's most important to us. We're in control.

5. Celebrate the anticipation.

Studies show that anything we can do to teach kids to delay gratification when it comes to spending will help them avoid impulse buys in the long run. Setting up savings goals and working towards them together can help, as long as they're not too far off to discourage. Celebrate the anticipation as you count down, too!

6. Dial up the gratitude.

You may be grateful to hear that studies also show that a sense of gratitude helps us avoid impatient financial decisions, impulse buys or borrowing in a crisis. Making moments to ask "What are we thankful for today?" is time well invested.

7. Go digital.

There comes a time when coins and bills in jars don't do the trick anymore. But the good news is that, with kids on screens these days, those four jars can easily transition online into separate accounts, and the kids can see their different balances growing on a bank app just as well.

8. Keep them interested.

Keeping pocket money amounts low and paying the kids 10% interest compounding each month shows them how it can grow - and grow quickly. The power of compound interest makes it grow like a tree when invested.

9. Have them invoice you.

Towards the tween and teen years, there may come a time when pocket money is no longer enough. To avoid frustration, transition your kids to paid work by identifying voluntary jobs around the house that they can do to earn more. Have them bill you once a week, and many money lessons will come with it.

10. Offload responsibility.

What we all want for our kids is for them to be successful when they manage their own money in the future. So every expense that they have as kids - whether a bus fare or a monthly mobile top-up - is an opportunity to help them learn how to take care of business. The sooner we hand over the responsibility, the better.

Get Sorted is written by Sorted's resident blogger, Tom Hartmann. Check out the guides and calculators fromSorted -brought to you by the Commission for Financial Capability - at sorted.org.nz.