Most parents aren’t in a position to buy their kids a house – particularly in Australia’s skyrocketing property market – but you can establish good money habits from early childhood and, done right, you can add some ethics training at the same time. The saying, “Give a man a fish and you feed him for a day, teach a man to fish and you feed him for life” can be equally applied to coaching children to be astute with money and helping them demystify the secrets to wealth and financial wellbeing.
The Three Jars
Ancient Chinese legend tells of a magical tree that sheds gold coins from its branches when shaken. The tree was grown from a very special seed given to a peasant farmer who was required to water it with his own sweat and blood for it to reach maturity, when the tree would then grow new coins to replace those fallen to the ground.
Dating back to China’s Han Dynasty, ornamental money trees continue to be popular at Chinese New Year and signify a long life of perpetual prosperity. Contrary to the magical story associated with money growing on trees, the implied meaning is that wealth and prosperity is gained through hard work, sacrifice and tireless effort.
In her book The Money Tree Myth: A Parents’ Guide to Helping Kids Unravel the Mysteries of Money, financial consultant and author Gail Vaz-Oxlade talks about the concept of the ‘Three Jars’ when trying to educate children about money – how to get it, how to save it and how to use it.
Though the Three Jars method is just one of many budgeting methods that advocate quarantining money for various purposes, its appeal to parents lies in its simplicity and its inbuilt generosity principle.
Economics Professor Roslyn Russell of RMIT University says that is important to teach kids about money as early as possible – even as young as three. “A lot of money management skills are developed at that early age between three and six.”
Its appeal to parents lies in its simplicity and its inbuilt generosity principle.
In the Three Jars method, kids learn to manage money as soon as they can count to three, while also learning some important lessons about philanthropy. At its simplest, a child is asked to divide their money into three jars labelled either Spend, Save or Share. Future money is likewise divided into the three jars. “It’s a fantastic concept because the areas are all ones that children can grasp at an early age,” Professor Russell tells SBS Life.
The Spend jar contains money put aside for short-term expenses, such as sweets, movie tickets or the latest must-have app, cheap toy or do-hickey, teaching kids that life expenses are normal. Children get used to handling money and make these purchases themselves. “Children need to feel money as something real,” says Professor Russell, who has consulted on the Money Minded financial literacy program. “It is too easy for them to see your plastic card as an endless pit of money.”
The Save jar is money set aside for longer term, big budget items such as a new bike, tablet device or games console. Get kids to set a target amount for the Save jar, or set a timeframe for building up a sum to be taken out and put into a bank or investment account. Training children to save for a purchase helps them avoid the lure of later relying on credit. Some parents even adopt an incentive system like paying interest on the Save jar balance to encourage a greater savings focus.
The idea behind the Share jar is that some of your money is not yours to spend or save – but is there to re-invest back into your community, donated to a charity or a worthy cause. “Sharing toys is one of the early lessons in families,” Professor Russell points out.
Children will learn to understand by the time they are adults that they will need to pay tax and see the benefits of making charitable donations. Professor Russell advises, “Giving, if it is introduced early, is something that you learn and don’t question. From an ethical and moral standpoint, it is important to learn to give, even if you don’t get anything back.”
Understanding the value of money
The Three Jars system is effective because it lets kids manage their own money themselves and take responsibility for the decisions they make. While parents can offer advice, guidance and monitoring, choices are driven by the child. Children then see the consequences of decisions they make – money spent on frippery is money not saved for things of greater lasting value. Importantly, children can then see saving as something habitual and develop a reflexive understanding of the ethical responsibility to share their money.
Another component of understanding the value of money that feeds into the Three Jars method involves children receiving pocket money from paid chores and odd jobs around the house.
When kids get money from their parents each week regardless of their performance, their parents become like a money tree – a mythical source of endless cash.
“I received pocket money in exchange for jobs around the house,” says Sydney-based financial adviser Marcus Roberts at Mirador Wealth. “The larger the job, the more I received in return. The rationale being that money had to be earned and this taught me that working carried a financial incentive.”
Roberts points out that kids should understand the difference between normal family jobs and jobs that are paid for. Paid jobs might be those a parent would normally do, and scaling the value of different tasks – washing the car or mowing the lawn – adds awareness that not all jobs have equal pay rates – and extra pay comes with extra effort and commitment and may even depend on the quality of the work done.
Parents could also encourage a child to exercise some entrepreneurial flair, having them offer to do extra work for extra money – to see opportunity for extra cash and to negotiate an agreement.
When kids get money from their parents each week regardless of their performance, their parents become like a money tree – a mythical source of endless cash that requires just the slightest bit of agitation to coerce lavish cascades of convenient cash.
Linking their allowance to work performed teaches kids how the world works and also gives money a very real value – it is exchanged for time and effort.
Pocket money across cultures
Attitudes towards pocket money vary from culture to culture. In a 2016 study comparing children from Japan, Korea, China and Vietnam and their relationship with pocket money, researchers found diverse attitudes to money given as allowance between the different cultures.
In Japan and Korea, children had the expectation that allowance money was for their own fun and personal use and let them express their own individuality through money. Conversely, children in China and Vietnam believed that pocket money was part of the collective household money and should be saved. For these kids, frugality is considered to be a virtue.
The researchers concluded that money now plays the role of an important tool in transacting human relationships, it is no longer just part of the market economy. They point out that perceptions of “normal” interactions with money varied greatly across cultures. They also said that the same behaviour has different meanings in different cultures.
As countries become wealthier and middle classes expand in Asia, money is changing its meaning, they added. As people gain more disposable income, the idea of what is normal is changing dynamically.
Children in China and Vietnam believed that pocket money was part of the collective household money and should be saved. For these kids, frugality is considered to be a virtue.
Born to a poor family in Zimbabwe, Melbourne businessman Prosper Taruvinga of Live Long Digital also sees the importance of teaching money management to children. “My parents did not have the means or skills to build wealth. My daughter will be given a budget and taught to manage her money and not be frightened of it. She will learn to save and how to make money work for her.”
In the Western world the giving of cash as gifts to children is less common because it can be seen as being less thoughtful. Rather than giving cash, money is often converted to gift cards or other vouchers. However, this prevents a child making a choice as to whether they wish to spend, save or share their gift.
Comparatively, in East Asian families, the cultural institution of giving a red envelope encourages saving. Every Lunar New Year or birthday, East Asian children usually get red envelopes containing cash gifts – considered the best gifts because the recipient can do whatever they please with the money. However, the culturally normal intention is that this money given by parents and relatives is set aside for savings.
The US government has developed a financial literacy resource, the Money as You Grow website, which includes age-appropriate money lessons for kids. The site suggests activities to help kids learn about money at different ages.
One key lesson for kids aged three to five is learning to wait before they can get something they want. At this age, impulse control is an important lesson, and saving up for a big goal is a great way to teach patience.
From ages six to ten, kids can learn about making spending choices and setting goals. And from age 11, they are ready to learn about compound interest and wealth generation. Older teens need to understand more complex issues such as taxation, loans and investment.
The Fourth Jar – wealth money never spent
Some parents introduce a fourth jar to teach a bigger lesson about money and how it can be used to create wealth. For example, US businessman and best-selling Rich Dad Poor Dad author Robert Kiyosaki says, “By giving kids an allowance, you teach that child to work for money rather than learn to create money.”
As children grow older, money from the Fourth jar could perhaps be used for interest-bearing deposits or even to invest in shares or as seed funding for their own enterprise – kids could explore buying and selling on eBay or set up a market stall, for example.
However, Bessie Hassan, money expert at finder.com.au, points out that wealth creation can be a culturally-sensitive area. “Islam prohibits the concept of earning interest on funds, so this is something that wouldn’t be taught by parents to their kids,” she says. “Instead, parents would teach their kids about Sharia-compliant financial concepts and products.”
The Fourth jar could perhaps be used for interest-bearing deposits or even to invest in shares or as seed funding for their own enterprise.
She points out that many Middle Eastern cultures have collective social values and family-owned businesses are common. “Therefore parents may encourage their kids to share their profits with the family or to work within the family business,” she says.
According to Professor Russell, introducing a wealth jar is an ideal time to also introduce ideas like investments and superannuation for long-term security and wealth growth.
Russell concludes parents also need to manage their own money behaviour to have an impact.
“When teaching children about money, keep the language positive. Recognise your strengths and weaknesses when it comes to money. Research shows that pocket money, has to be used with some control and monitoring from the parent in order for the outcome to be most effective in being taken through to adulthood. Be aware of your role modelling in general with money and how money is talked about in the household.”
For more helpful ideas and activities to help teach kids about money visit ASIC’s Money Smart website.
New South Wales 2016 Woman of the Year, Jen Armstrong is founder of the Beauty Bank, and a woman always on the go and on a mission.
As a domestic violence survivor, Armstrong now looks at ways to support others transition out of abusive relationships and into situations of support and safety.
Jen says that the recent launch of ANZ’s Money Minded report addresses an important issue in the area of family violence.
“Getting out of an abusive situation is really difficult, and it’s made harder if you don’t have the financial resources and you don’t understand your rights or even have a handle on how to manage your money,” she says.
“Anything that can help women rebuild is great, and education is something that no-one can take away from you.”
Even a small gesture of support after leaving a violent situation can help rebuild self-esteem and confidence, she says: so in 2012, she started The Beauty Bank to donate care packages to domestic violence survivors.
“I was in an abusive marriage with a violent man. I had a ten-month old daughter and was six months pregnant with my son. After being put in hospital for the third time after being kicked in the stomach, I knew I had to get out.”
With the help of a Police Officer and a Social Worker, Jen escaped to a safe house with her daughter. “They told me if I didn’t leave immediately, they’d take my kid away from me. That was the moment that ultimately forced me to leave.” Jen admits her mental health had become so poor that she found it difficult to pluck up the courage to go.
Jen took few personal possessions when she left and struggled to make ends meet. “Everything I had went to looking after my daughter and getting ready for the birth of my baby.”
Managing the limited funds she had in the early days stretched her to the limit.
But when Jen received a donation of some baby goods from charity organisation Dandelion Support Network, with a care package including a bottle of luxury body wash – it was the catalyst that prompted her to devise The Beauty Bank.
“It seemed insignificant at the time but it was a little treat – an indulgence that I would never have purchased.”
On putting her daughter to bed at night, Jen would shower and use the body wash. “It was a tiny life luxury – a little indulgence that made me feel special. It made me feel like I wasn’t worthless and it helped restore my self-confidence,“ she remembers.
“It was then I thought: if this simple thing could do this for me, then it could do it for other survivors too.”
Growing the Beauty Bank
The Beauty Bank has since gone from a simple concept to a service that offers care packages to women and men coping with the transition away from abusive relationships. Each care package contains cosmetics, toiletries and other ‘life’s little luxuries,’ distributed via social workers to people forced to leave domestic violence situations.
The demand for the service has grown hugely and it currently distributes 250 care packages each month worth an average of $235 each, with all items donated by the community and sorted and packaged by volunteers.
The Beauty Bank has been such a success that it has outgrown its original scope and there are now plans to expand into other states.
“Our current challenge is to keep up with demand as the success of the project has grown. We need to find more suitable premises and get some corporate sponsorship on board too,” Jen says.
Jen and her former husband had not been married long before occasional abuse escalated, with the situation worsening when they moved from two incomes to a single income family.
“That’s when the financial abuse, control and manipulation got out of hand – I had to explain where I spent every cent. If I had a coffee, I’d have to explain where I went and with who I went with,” Jen says.
“Domestic violence is about control and domination. Whether it be physical, psychological, emotional or financial, it’s about breaking someone down to make them feel worthless.”
Even now, that period of Jen’s life affects her. “I still see a domestic violence counsellor now and she is helping me deal with a lot of the issues that continue even today. The physical scars may heal quickly but the psychological and emotional damage that we keep inside takes a lot longer to heal.”
With The Beauty Bank now largely being run by Operations Manager Denise Dolan, Jen’s current focuses is on public speaking, particularly talking to young people in schools.
“It’s vital to get across the importance of respect and support and being a decent person,” she explains. “So much acceptance of a culture of abuse and violence comes from what young people see and how they act. Girls and boys need to build each other up, not tear each other apart.”
Education and Financial Literacy is key
To Jen, education and empowerment of women is crucial to safeguard against calamity.
She says women need to be actively involved in financial decisions and management and to have financial literacy.
“Don’t rely on your partner to manage everything – know where the money is, how it is being spent. A person shouldn’t be in a situation that they have to stay in an abusive or violent relationship because of financial necessity.”
Jen knows this first-hand. Though she’d left the relationship, she couldn’t leave the $15,000 credit card debt her husband had accumulated in her name.
Pregnant and unemployed, she had no means of repaying the debt. She was living in temporary accommodation and had no assets – and was very close to being declared bankrupt. If it wasn’t for the help of an astute financial counsellor, she would be in a very different circumstance today.
“I had all this money that I owed and I knew that if I was declared bankrupt I would have absolutely no chance of recovering from that.”
Armstrong wants to see financial counselling made available to all domestic violence survivors.
“When you’re in the middle of the crisis, the bills and expenses still keep rolling in and often there is no way to pay back your debts. That adds hugely to the stress you’re going through and really impacts negatively on your mental health. Survivors need help getting themselves financially back on their feet.”
Learning to achieve her dreams
Since 2012, as well as creating The Beauty Bank, Jen has completed two diplomas and is close to completing her degree. She’s studying a Bachelor of Business (Advanced Business Leadership) at Western Sydney University, majoring in Sports Management.
“WSU has been really supportive of my particular situation, and the flexibility they offer lets me structure my learning around work and family – and that’s allowed me to get really great marks.”
Jen also works four days a week as the Stadium Operations Coordinator for the Cronulla Sharks Rugby League Football Club – and her employer has come on board, making The Beauty Bank the Signature Charity for the Club.
“The Sharks have been fantastic in helping me get public exposure for what we are trying to do at The Beauty Bank and getting the message out to the broader community,” she says.
Jen’s job has also been hugely rewarding, with 2016 a stand-out year for the NRL club. Membership and game-day crowds were on the rise, and success on the field culminated with the ultimate prize, the NRL Premiership Trophy.
“It’s been a very long time coming but seeing the Club win its first Premiership ever after all the highs and lows over the past 49 years shows me that perseverance and determination eventually delivers success,” she says.
On Jen’s left wrist, in small tattooed black text are the words Invictus Maneo. “It’s the Armstrong clan motto and it means ‘I remain unbeaten.’ It was my 21st Birthday present to myself.”
“It says a lot about me and what motivates me – I only wish I paid more attention to it in my marriage.”
Armstrong looks to new challenges in the future. “I think that so much more needs to be done about domestic violence at a policy level and I’m interested in exploring the possibility of ways to change legislation. Entering into politics at some point could be an option. I’m not going to rule anything out.”
Whatever the future may hold for Jen, she is determined to live life on her terms and be guided by a quote from a poem that she cherishes and keeps as her personal mantra: “You will not define me, I will define me.”
“Play the Game”
This feature looks at the kinds of tests (like personality and psychometric tests), challenges and games that some employers pose to interviewees during the hiring process. It was written in March 2017 for ‘Postgraduate Futures’ magazine published by Refraction Media.
This feature article by Fran Molloy published on 31 October 2011 for the Australian medical newspaper Medical Observer, investigates claims that some smartphone apps that are promoted to doctors and health professionals can allow pharmaceutical companies to harvest doctors’ usage data for market research and to promote sponsored ‘health information.’
This article (full version requires a subscription) includes interviews with key Australian sources about the risks to data integrity built into the use of some medical apps.
Fran has written many feature and news articles for Medical Observer, a weekly health newspaper with a readership of over 22,000 health professionals which goes to over 90 percent of Australian General Practitioners.