Teach your kids well

PITA ALEXANDER
Last updated 05:00 08/06/2014

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OPINION: Our children are our future and this applies equally to the homes of rural communities as our cities.

Farming children often have to deal with geographic isolation, small schools perhaps without the opportunities of a city education and, as they grow up, the expectations of running the family farm and the challenge of how this will be divided between siblings.

These are major issues worthy of deep thought, as agriculture is by far the most important business in New Zealand, and is likely to remain so for the foreseeable future.

The children of most farming couples are better educated or will end up better educated than their parents - this is a healthy development.

My advice for rural parents is, don't get too hung up about late developers. I was a late developer who rarely did any homework, received the cane often and didn't enjoy my school life at any stage. All my school reports said I wasn't motivated, yet had potential, and my father always wanted to know when this potential would come.

It's not that I'm suggesting students take it easy at school, but late developers almost invariably will not know at age 18 what they want to do - I certainly didn't. Late developers, though, do need a strong mentor. My mentor was my mother and she was always the glue in our family. Don't hammer late developers - help them think through their strengths and weaknesses.

The bottom 10 to 15 per cent of workers in the world's largest cities run a real risk in the next 20 years of being replaced by robots and hi-tech mechanisation.

Unskilled labour will become a major problem in some countries.

Now, more than ever, our children must learn skills and keep updating them - this is our responsibility as much as theirs.

Education is not about filling a bucket - it is about lighting a fire. Education that is a pain won't work - parents need to get involved in these situations.

Some kids like team games and others like non-team games - both have a place. My old school always frowned on my not wanting to play rugby. My mother's only concerns were that I played fair and hard, and learned to lose with dignity.

It is fair comment that sometimes our children can borrow more cheaply with government student loans than can their parents. That point is fine as far as it goes but I am against student loans of any more than about $15,000 to $20,000. Why? Because after three to five years of intensive study, a $50,000 to $75,000 student loan is more than daunting and a bad start for anyone approaching a career. You and I need to quietly inject some cash into our children's financial position right from the outset. How much is up to you but $800 to $1000 a month for about 10 months of study each year would go a long way to helping them out. Over four years that would amount to $32,000 to $40,000. Think of it as an investment and the capital cost is not up front, but spread over maybe 48 months, which might ease the pain.

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Our kids struggle with the concept of budgeting and, in particular, capital budgeting as opposed to budgeting for income and expenses. I watched my own two children at 10 years of age struggling with the concept of a capital budget but it worked out well further down the track. I said to my son with his first car purchase that I would contribute 25 per cent of the capital cost interest-free, but only if he contributed the other 75 per cent with no borrowed money. He carried out many calculations on paper to work through the mathematical possibilities but it worked and stood the test of time.

Kitchen-table talks with our children on strong sound financial management are high-class education, even if the subject crops up again and again.

Money management education with our children is absolutely essential in today's business environment. Arguments and disagreements over money can be game-changers further out.

A lack of money can build character but it can also destroy character - that is why you and I must lead from the front. If mum and dad are no good with money then their children are well and truly on the back foot. Poor financial management tends to be hereditary.

Don't be unduly concerned about all of the media space presently being given to the inequality around the world, including New Zealand, between the top and bottom income earners. To be in the top 10 per cent of New Zealand income earners, you need to earn more than $72,000.

Initially the development of skills is not a high income earner but, after about five years, these skills start to pay off. For the last 30 years of our children's working life, they will generate real income. The argument in the media is that some earn about five to six times what other people earn and that this is a major problem. To me, the top 10 per cent should probably earn four to five times the bottom 10 per cent because of ability, skills, discipline, patience and perseverance. The real issue, as I see it, is that New Zealand must provide equal opportunity for its people.

Education is too serious to be left to the politicians, some of whom obviously had limited education themselves.

Top education should begin at home, around kitchen tables. Don't think your family education costs stop when your children leave high school. If the table talks have worked, you will be up for further costs. We must keep our powder dry for tertiary education - the long-term dividends for our children are hard to measure, mainly because they can be so enormous.

If it wasn't for my mother, I would have left school the day I turned 15. What a mistake that would have been and the debt I owe her is beyond enormous - mothers and fathers in this situation need to push fairly hard on some of these issues. My mother did even though I couldn't really see her point at the time.

Before long, your child will bring up the crucial issue (in their eyes) of owning a car. Trying to fight this will often be like trying to discuss a tractor purchase with a farming husband who has "iron disease" - that is, you are shot before you start. A better approach is to slowly and quietly get in behind the proposal and make sure the car proposed has ABS brakes and airbags. If it doesn't, you need to find enough capital cash to ensure that it does. Don't spend $100,000 getting a child to 17 years of age and back off at a cost of $5000 to $7500 that will give them a good chance of survival in a car accident. After this is successfully navigated, you may well need to help them with buying their first house. They could rent for a few years, but facing a house renting situation forever is not a runner. Plenty of evidence indicates that owning a house eventually is important for our children and their children's wellbeing.

Who takes over the family farm and how it is divided remains a sensitive subject, perhaps less so than 30 to 40 years ago. This might be because farming families tend to have two to three children instead of four or five, and not as many may want to come home to the farm. Easing the pressure is that rural children are better educated and have more career opportunities. Some children don't want to work as hard as their parents and others feel they have the skills to earn as much in off-farm businesses and employment.

If it was easy to bring up and educate our children, pigs would be flying overhead. Never forget that your children will choose your nursing home, so keep your thinking of their development crystal clear throughout.

* Pita Alexander is a specialist farm accountant at Alexanders.

- The Press

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