As someone who benefited from investing in property when I was younger, it’s no surprise that I want to introduce my own little ones to the game as early as possible.
Granted, my 2 year old daughter may not be ready for it yet(!), I do believe sound financial strategies start with a system of responsible money management at home.
Understanding how to treat children when it comes to handling money is the first and most important step.
One of the great tips that I picked up recently was from a book by Ron Lieber, personal finance columnist of The New York Times who wrote The Opposite of Spoiled.
In the book Ron teaches some really interesting techniques about how to give an allowance to a child without having them take it for granted.
I was always brought up with pocket money in exchange for jobs around the house and at the time, receiving a gold $2 coin felt like a king’s ransom.
As far as monetary reward goes through, usually a rule of thumb is you that you give a dollar for every year that they are old. So if they’re 7 years old you give them $7 per week for completing certain tasks around the house, like doing the dishes or mowing the lawn.
However there may come a point where they feel, “I have enough money,” and they don’t want to do those tasks anymore, so this can be a flawed system as they get older.
One of the things that he does suggest doing, which I think is fantastic in terms of fostering kids for investing in property in the future, is to have them look for opportunities around the house where they can do a job or can add value to the property.
This could be as simple as raking the leaves or painting the fence or doing something that’s quite different from their usual tasks that they can generate some cash from.
The idea is that they actually come to you and negotiate the allowance they’re going to get for it.
I personally love this idea on two levels.
First of all, it gets them looking for opportunities – things that they wouldn’t normally have thought of that could be quite out of the norm – a super useful skill when it comes to looking for property deals.
The other great idea is that they negotiate on the price and the terms.
Having them understand the value of negotiating, that the price can vary depending on the value of the task and how it’s sold, is something that can really open up the mind of a child who often doesn’t get a say in what they can generate from their chores.
Being able to handle money responsibly and understanding how value is generated in exchange for reward is a great start to teaching kids how to handle their own financial needs.
While property might be a more advanced strategy that could build wealth for them in the future, laying down the fundamentals first will provide a solid grounding to what lies ahead.