Our kids’ financial literacy

We all want to ensure our children are equipped to make sound financial decisions as they grow up and navigate life, and I’ve consistently felt that our schools don’t teach very much about fiscal responsibility in the primary and middle school syllabus.

Teaching our children about money is a well-canvased discussion and many people have some fabulous examples of fiscal education, from pocket money initiatives to charity support. Fiscal education is more than just learning how to make money or build wealth.

It’s about creating a meaningful relationship with money, and in particular, finding ways to make a positive difference for others who really need it.

Helping our children understand the joy of sharing beyond the thrill of acquiring is a key focus for many parents and influencers, but the task is not an easy one, nor is it simple.

Last week I caught up with an industry friend and colleague, Matt Donat (a partner at Koda Capital). Matt and I recorded a mini-series podcast that broadly focused on his work with (very) high net wealth clients and our conversation uncovered more than just a few misconceptions about his clientele.

So many of us would assume that a high net wealth individual wouldn’t have many worries. Tens of millions of dollars, typically triggered by a sale event of a business or an inheritance can be life-changing for the recipient. Matt shared the various ways that this newfound wealth can be seen as either an opportunity or a burden.

The concept of money being a burden sounds incongruent.

But mismanagement of the money can easily turn the fortune into a burden when emotions, family and lifestyle is considered. A common failing for such individuals includes an initial overspend without clear strategy. Some of the mistakes include, but aren’t limited to;

• A hearty purchase of expensive ‘treats’, such as boats, expensive cars, amazing holidays, overcapitalisation works to the family home, holiday houses,
• A high-risk reinvestment of the money into category that they know little about, (compared to the industry that they made their fortune in),
• Spending too much of the capital in the early days and having regret about the limitations of their ability to do something meaningful with the residual,
• Suffering boredom or a sense of ‘loss of identity’ when their extreme work rate is suddenly changed following a business sale, and
• Spoiling their children with well-meaning gifts, but later finding themselves worrying about their children’s lifestyle, choice of friends, and sense of entitlement.

The latter point intrigued me, because this type of burden would be understood well by many parents.

Nobody wants a spoilt brat.

So what does Matt do for his clients when this latter concern is real? And how could this impressive approach help more than just high net wealth families?

There are various ways that Koda help their clients optimise their wealth but the key method that struck me as highly valuable was that of philanthropy.

We associate philanthropy with bequests but it goes far beyond this.

A trip to a city gallery will often show art lovers the name of the individuals or families who have donated a bequest to the gallery. Sporting clubs feature photographs of club members and donors who have given generously to the club. Community leaders will speak of the kindness and contribution of others who have made a positive difference to their community through a generous donation.

Some of Koda’s clients are encouraged to consider philanthropic investing to help educate and prepare their children for a new future. The learning starts with a common and passionate focus. The family consider the charity, cause, club or community(ies) that they’d like to make a positive contribution towards. This initial decision can set in stone some common goals and tighter bonds between family members.

They then determine, alongside their advisor, a suitable strategy for their model. An initial capital amount is agreed upon and in a lot of cases the team decide to invest the capital into their chosen asset classes, (with a healthy combination of growth and defence) and distribute the profits to their recipient(s). This strategy generally spans years and sees key team members through teenage years and into adulthood. Director status often applies for the young adults, and key boardroom skills, business acumen and critical decision-making is the product of their fiscal education under this model.

According to Matt, many of these children go on to run highly successful and highly fulfilling roles in the business community, all the while having their feet firmly planted to the ground with their appreciation of the hard work that was expended in the first place by the person who built the wealth.

Following our recording time in the studio, I was so excited by this model that I put out a post asking my own community to share some of their own successes with their children’s fiscal education.

Some of the initiatives that parents have developed are nothing short of exceptional;

Charles rewards his children financially when they help with major tasks around the home, from painting to serious gardening. Interestingly, he also encourages them to sell unwanted items online, save a third of money and use the residual two thirds as they wish.

Marion runs a Money School holiday program for children and focuses on;

• making money
• keeping money
• multiplying money

Scott’s children have now experienced over two decades of investing in small deals and he’s focused heavily on them understanding the security of investments too.

Caterina shared a great YouTube video by Robert Kiyosaki teaching his four quadrants of financial literacy, and she emphatically feels that teaching both adults and children about financial literacy is so important.

My husband, (and our close friends whose children have enjoyed “JV”s with our children) have consistently encouraged entrepreneurial adventures, and just ‘giving it a go’. Pushing past shyness is important for them when it comes to selling their produce, but also considering concepts such as arbitrage, (ie. selling from one market into another to make a profit) has been well used lesson plan in our own teaching.

My stepson learnt in his early teens the benefit in buying goods online in bulk and repackaging them into individual shipments. From body jewellery to crystals, he had some exciting successes with his ebay business.

Refurbishing old furniture sourced locally on Gumtree and selling online was one of his first ventures. His $80 profit from the sale of a set of drawers whet his appetite for earning serious pocket money.

My daughter’s kitchen prowess with her buddy yielded enough to buy an ipad, but her fiscal education spanned past earning money and focused on giving money when she found herself immersed in one of Sri Lanka’s Saving Turtle programs in 2017. A $10 purchase of a baby turtle for hand-release into Weligama bay opened her eyes to meaningful causes and the positive impact of giving. We have since stayed in touch with the turtle sanctuary.

This blog has been special to write and our ability to guide our children well with fiscal education can never be underestimated.

We all have something valuable to share.