How to get the kids saving for the next family holiday
The financial expert behind bestseller The Barefoot Investor, Scott Pape, shares his top tips for teaching kids about saving money, with a special trip in mind.
- April 2019
Scott Pape’s first book The Barefoot Investor: The Only Money Guide You'll Ever Need was a phenomenon, selling more than a million copies, and the eagerly anticipated follow-up The Barefoot Investor for Families (HarperCollins Publishers, AUD $29.99) is another clever, funny and practical guide to help parents get their kids saving. Here, Scott shares his wisdom about children, holidays and money matters.
What advice would you give to parents saving for their annual holiday?
In my first book I advise adults to get a piece of paper and a pen and divide their pay into “buckets”, labelling them “Blow”, “Mojo” and “Grow”. To help save for that holiday, I would recommend parents put aside about 10 per cent of their pay into a separate account and label it “Smile” as part of their Blow bucket, which is all about splurging.
You suggest parents should help their kids save by setting up three empty jam jars labelled “Splurge”, “Smile” and “Give”. Can you explain the concept behind this?
Splurge is all about not having tight-fisted kids. You want to have kids who like spending money because nobody likes a tightwad. Smile is all about saving up to spend on bigger things that make them smile, which could be something like a holiday or at least spending money for a holiday. Give is so you have empathetic, caring, generous kids and not entitled brats. Kids are visual and each of the three jam jars teaches a behaviour. Let the kids decide how much pocket money is put into each jar but each jar must get at least one coin.
How much pocket money should kids get?
The answer to that is as much as parents can afford. My view is that pocket money is just a tool for teaching financial education. One dollar per year of age [so AUD $5 for a five-year-old], per week, is a good rule of thumb.
What about teens?
Teenagers from 15 years old and up should be getting a part-time job for a few hours a week. That way, they’re earning their own money and not just riding the parental gravy train.
How can people save on everyday expenses without it being such a painful experience?
If you can save on your mortgage, bank fees and put money into buckets and track it, then saving for that family holiday will be a breeze. Those are the things that I prefer to save on rather than saying, “I am not going to have a coffee” or “I am going to wash my windows with potatoes and reuse bathwater” or any of that other stuff that I just don’t do.
What about using a credit card?
A lot of parents in that December-January period are at breaking point – they’ve spent money on Christmas, a holiday and then are hit with school bills in late January. The worst thing they could do is put money or pay for a holiday on a credit card and spend more than they can pay off. It is a recipe for the holiday from hell.
How can you get kids involved in organising a trip the whole family will enjoy?
Start planning the holiday about eight to 12 months in advance. Sit down at the family table and get the kids involved, say “this is what we can afford” or “this is what we can save for”. Talk about a destination Jetstar has a sale for and how you can get cheaper accommodation. It doesn’t need to cost much. You can spend most of the time at the beach or in the hotel’s pool. This teaches kids about financial responsibility, so they can see the importance of having to save and that it is not just a free-for-all.
What do family holidays mean to you?
For us it is about creating memories for our children and spending tech-less time together. My kids are five, three and one, and what I’ve realised – having just returned from Fiji with that summer glow – is that we all work pretty hard during the year so being with our kids without iPads or other distractions is the best part of the holiday.