The Importance of Saving and Investing for Children with Will Carmichael
Wow, I can’t believe we’re into Season 2 of the podcast already! This season is going to be focused around giving you valuable information, education, and insights into savings and investments. I’ve chosen to dedicate a whole series to this topic for a few reasons; I get lots of questions about savings and investments from clients and in my Facebook community, from questions about the jargon involved in investing to the difference between saving and investing and how to get started.
So I really want to focus during this season on busting some myths and giving you some clear options around saving and investing. I have some fantastic guests lined up for the series, from professionals to ‘ordinary’ people like you and I. All of them have in some way overcome the struggles of knowing where to begin with saving and investing, and have gone on to make some really good financial decisions in these areas.
This particular episode is all about teaching children about money, which is something I have spoken about before. It’s well worth checking out episode 4 of season one of the podcast, when I spoke with Rob Gardner about teaching our children about money. He had some fabulous insights, and I really enjoyed the interview with him.
My guest today is Will Carmichael, the CEO of a company called Rooster money, which is a pocket money tracking app which has been designed to help parents take the first step of helping their children understand the value of money, and progress all the way to setting up their first bank account. Founded in 2016, Rooster money’s mission is to make saving for children easy, understandable, and fun.
I’ve been using Rooster money with my own children for around a year now, and the app is fabulous. It’s colourful and engaging, and gives you so many options to teach your children about money and saving, as well as the importance of giving.
Will and I talk in this episode about:
- Pocket money
- Whether pocket money is a good idea and the average amount given in the UK.
- We also talk about the role that the digital world plays in how we manage our money
- The importance of teaching our children about money in a digital world and
- The importance of saving and investing for children.
Listen to the interview
Hi Will, can you tell us a little about yourself?
Sure. I’m the CEO of Rooster money and am based in London, although Rooster Money operates across several countries. I’m a dad of one myself, with our second baby due in 6 weeks time.
Congratulations, how exciting! So how did Rooster Money start?
We fundamentally believe that building confidence with money in our children is essential, and our mission is to change the way the world talks about money with children. So Rooster Money was designed as a framework to help parents have those conversation with their children early on.
There’s a huge amount of research showing that habit formation in money starts as young as 5, and if we start those habits early on they can stick with you for life. Over 40% of what we as adults do every day is down to the habits we have, so it’s a great opportunity to build positive, lifelong habits.
I find it extraordinary how quickly, easily, and adeptly children are able to pick up new language and skills compared to us as adults. So I really believe that we have a golden opportunity to start these conversations early.
What would be your tips to parents in terms of starting to have those conversations with their children?
I’m a firm believer in context, so it’s important to have these conversations, for example in shops when children want something. It doesn’t necessarily have to start with physical money either; many parents choose to begin with things like reward charts and stickers, for example, which ‘earn’ rewards.
Beginning with a reward concept, you can teach children that they need to earn a certain amount of something, be it stars or money, in order to do an activity they’d like to do or exchange what they’ve earned for a reward of their choice.
As children get older, there are lots of opportunities around the home to have conversations about money. For example, if you’re trying to encourage your children not to leave lights on around the house, you can start talking to them about the cost of utilities. Talking to children about why we work and have jobs in order to earn money to pay for things like our homes and essentials is a really great way to start too.
I think it’s so important to relate money discussions to experiences and things that aren’t necessarily physical coins in a purse.
I think that’s true for adults too; thinking about the end game rather than just the pounds and pence themselves. It really comes down to the context, and building confidence with money really helps to shape whether we view money negatively or positively.
Talking about the value of things is a great conversation too. It’s not just about what something costs, but whether it is worth that amount of money to us.
Do you think as a society we put too much emphasis on understanding products (such as ISA’s etc) rather than understanding habits?
I think it’s important to start by knowing what your end game is. So if you’re thinking about money or perhaps wanting to start saving money, it’s important to know what you want to eventually do with that money?
This allows you to have a goal, but also to then choose the right product for your particular goal and end game. There are a lot of products out there, and one of the reasons I became interested in financial education was as a result of some research that showed that people will decide against using a financial product if they don’t understand it.
For children, I think it’s important to look at the difference between them having money in an account to spend on treats, and saving and investing for their future. What are your thoughts on that Will?
So my perception is that saving is a concept, whereas investment is a type of saving. Typically, investments would be something that maybe have a higher risk factor attached to them, but that risk is mitigated by the likelihood of a higher return over a long period of time.
We know from research that saving for saving’s sake is really hard, so attaching a meaning or goal to our savings is important. It’s also important to decide whether you’re looking for something short or long term, as again this will help you to decide between cash savings and investing.
It can feel over-complicated in our minds can’t it? Do you think more work could be done to help people to feel more confident with investing?
Absolutely. I think being confident in making the right choices for you is so important. I think we have a really interesting opportunity with children to help them to understand their options from an early age. With my own son, we opted for a junior ISA which we chose to be invested into stocks and shares. Our aim is for him to be involved in discussions around what that money might be used for in his future, and to help to teach him about making sensible decisions with that money for his future.
Talking about making sensible decisions, what impact do you think pocket money has on children in terms of their relationship with money?
I think pocket money is an amazing vehicle to start having conversations with kids about money. Giving a little bit of money and empowering children to make their own decisions about what they choose to spend it on makes it easy for us as busy parents to make conversations about money a part of our everyday lives.
It helps to get them thinking about money in general, but also about objectives and future planning. Kids very soon begin to think about whether they want to spend their money on a smaller thing or save for longer in order to buy a larger item that they want. It helps them to understand that instant gratification isn’t always possible and, as I said before, begins to teach them the value of things.
On a practical level, it can make our lives as parents easier. For example, rather than having to say no to the magazine with a toy in the supermarket, we can talk with them about how much they actually want it, if they have enough of their own money to buy it, and if it’s worth it to them. This then empowers our children to make their own choices. They may choose to buy it and either learn a lesson that it wasn’t actually worth what they spent, or that it was!
You completed some interesting research on this recently didn’t you?
In 2018 an average of £254 was given to children in pocket money, and the average amount saved was 39% of that.
We produce something called the pocket money index which you can see on our site. It shows that the average given per week is around £4.88, but this obviously takes into account lower amounts for younger children and higher for older children. The index gives us lots of insights, including what they’re saving for and how much they save.
It really does show that with a little nudge kids will choose to save; nearly 40% is a huge amount to save!
Do you think that the digital influence has in impact on that? Compared to the piggy banks of old where you probably wouldn’t have known exactly how much you had, with Rooster Money children can see at a glance exactly how much they have.
It can be a double edged sword; technology is a huge enabler around money. World bank has cited technology as the biggest opportunity to tackle poverty and access to money globally.
I think the fact that we can see our money at a glance via an app is a great thing, and for kids to be able to take their money with them wherever they go and have access to their balance anywhere is a great thing.
In some ways, though, our relationship with technology has abstracted our relationship with money. Money is less tangible now, and we can go a week or more without touching actual physical money, so there is a challenge there to build the connection. It’s important, I think, to be able to bring all the different accounts we have into a single view where we can.
In terms of money, the app store is an exciting place right now; there is an app for almost every element of money management you can think of. Opening an account, be it a banking account, savings, or investment, can be done very quickly, but we need that clarity of being able to assess if these services are good for us and will provide what we need personally.
I totally agree. So what’s next for Rooster Money, Will?
We’ve spent the last couple of years building out the product and now have the fundamentals in place. We have a few extra features being added soon, but what’s really amazing is that we currently have 51 currencies being used in the app. So we’re focussed a lot on listening to our users and making sure the service works for anyone.
It’s really great seeing the service grow and come alive, and I’m excited to continue to share our message and our goals.
If you’re interested in finding out more about tax free junior ISA’s, listen to the full podcast where I explain in depth how junior ISA’s work, how you can go about opening one, and how to manage the money that is put into the ISA. I also explain the difference, and different benefits, between cash based ISA’s and investment/stocks and shares ISA’s.
Finally, if you’re interested in learning more about stocks and shares and investing in general, stay tuned to season 2 of the ‘In Her Financial Shoes’ podcast, as I will be covering this in much more detail in future episodes.
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