Christmas is coming. The time of joy, caring, and spending money you can’t afford on presents that will be discarded tomorrow.

With families across NZ feeling financial stress, the kids whining about some expensive toy is the last thing anyone needs. If you’re having to budget for a block of cheese, a new Chromebook is an unrealistic dream. But you can help change the narrative.

As their caregiver, you can change the trajectory of their finances forever.

Financial freedom is having enough money to live comfortably. It’s having money in the bank so that you can automatically pay your bills with no stress. It’s having savings so that any sudden expenses, like your fridge or car breaking down, are payable without getting into debt or causing huge stress. It’s not about being rich; it’s having choices and not experiencing daily stress from being short of money.

So how can you set up your kids, so their future is financially secure?

1. Teach Them How Money Works

There’s more to money than transactions. There’s budgeting, good vs bad debt, compounding interest, retirement savings, investments, and so much more. And if you teach them the basics now, they won’t be overwhelmed by the complexity of it by the time they start making their own money.

And while you should understand these concepts yourself, you can outsource training too. We recommend following this blog (of course), but there’s also age appropriate books, YouTube channels, and even Netflix documentaries about money and finance.

By educating about money, you’re removing stigma, adding knowledge, and setting them up for success.

2. Help Them Identify Wants vs Needs

You can start this from a young age and help to avoid that ‘I neeeeeeeeed it’ conversation.

Needs are the things we must have to survive: food, water, clothing, somewhere to live, electricity to charge our phones. A want is a certain brand of clothing, a toy, sparkly nail polish. While things may feel like ‘needs’, especially when all the other kids have whatever the thing de jour is, that toy/ shoe brand/ new game is only a want.

You can teach this by going grocery shopping with your kids. You can explain that toothpaste is a need to remain healthy and avoid expensive dentist visits. But things like fizzy drinks, chocolate, and imported mangos are a want.

This Christmas, rather than buying huge amounts of gifts, limit it to four items:

• A want
• A need
• Something to wear
• Something to read

Get them to write a list with columns for wants, needs, clothes, and book/comic, and you can choose one from each for their gift. They still get to write their list, but they can acknowledge the cute new PJs are a need, and the toy is a want.

3. Explain How Money is Emotional and Psychological

At some stage, your kid will try to explain to you that their want is actually a need. Because it feels like it- everyone else has it, they REALLY desire it. And here’s where you explain they are being manipulated. Advertising, insecurities, and social expectations really set them up for failure.

• Marketing: It’s estimated that every person sees around 5000 advertisements per day. And they are all asking us to spend money on things we truly don’t need.
• Insecurities: If you feel insecure about yourself, you might be tempted to buy expensive things to cover it. We can often rely on external validation to make us feel better, and that includes buying things. The act of buying things gives us a burst of endorphins, and it gives others around us the impression that we are more successful.
• Social expectations: As young kids, they want the toys their friends have, or the ones they saw on some YouTube advertisement or unboxing video. As teens, it’s that makeup or t-shirt brand or new shoes. As adults, it’s having that nice house on the good street or fancy car. Teach them about these social pressures and expectations and how harmful they can be.

Our advice is that no-one who matters cares about what we own. Let those insecurities go and remind yourself that most marketing and advertising relies heavily upon making you feel like you’re missing out, that you’re not good enough, or that your life will be better buying this or that thing.

This Christmas, chat about how some things on their list make them feel. If, for instance, there’s a really expensive shoes on their list, ask them why that pair? Why are they better than an identical pair that doesn’t have that brand name? Why do they want THAT particular pair? How will it make them feel, having it or not having it? Will it really suddenly make them cool and accepted?

4. Be Their Financial Role Model

Your kids will follow your habits. You are their biggest and most influential role model. So, involve them in your finances from a young age. Studies have shown that kids can start learning about money from six or seven years old. This can look like:

• Giving them pocket money/ allowance and teaching them responsible spending. Be aware that they will make mistakes, and this is ok; it’s an opportunity to learn, not a time to punish
• Involving them in budget discussions. Rather than ‘we can’t afford this’, the conversation should be ‘that’s outside the budget for this month. Let’s look at next month’.
• Talk about money; it shouldn’t be a taboo topic. Why do some things cost so much? Should you buy one pair of quality, expensive shoes, or two pairs of cheap shoes? Ethics of mass consumption and fast fashion also are worth talking about too
• Have a budget for supermarket shopping, and show them how that works, how saving $1 on budget brands adds up to save a lot
• Have a savings account for them that allows them to save for big purchases. This could be a new toy, a trip to the movies

This Christmas, talk to them about their expectations and the realities. Yes, we all want to have a magical Christmas, but the reality is that having rent or mortgage paid is more important. They don’t need to know everything, but they should be able to understand that a swipe of card will get you anything you want – there’s a limited to available funds, so choices have to be made.

Christmas Isn’t Actually About Gifts

Think back, can you (or your kid) remember what they got last year? Is it still in use? What do you both remember about the day? It was probably the whānau coming over, hanging out with cousins and friends and neighbours and loved ones. It was probably playing backyard cricket on the beach, or the BBQ lunch, or the pavlova for dessert.

The reality is that:

• Half of toys are unwanted, and 13% are never played with
• A quarter of toys are discarded by the end of January, and 66% by August
• Wrapping these gifts creates obscene waste in itself, most of it not recyclable because it’s foil based or has glitter. In NZ, based on UK figures, we consume upwards of 15 million metres of wrapping paper each Christmas.

Gifts truly don’t matter. Christmas is about time with people we love and not the insane number of gifts we exchange. By teaching your kids about money, and practicing thoughtful gifting, you’re setting them up for financial freedom.

Not sure how? Contact us at Smart Adviser for a chat. We can help set your finances up to reward you with a happy, secure, financial future.

Meri Kirihimete