How to teach your kids about money

Oct 22, 2018

How to teach your kids about money

In today’s competitive real estate market, saving for a first home means being money smart. You need to know how to balance the needs of daily life with your future goals and aspirations.

Whilst you can start saving for a home at any stage of life, it certainly helps if you start early. Helping your kids develop good financial habits is an essential life lesson that will make it easier for them to make big decisions later in life, like buying a home.

The problem is that despite recent research1 showing that most Aussie parents think their kids will be financially worse off than them, they’re reluctant to pass on key knowledge about money.

Yet a study published in the Journal of Consumer Affairs2 reveals that kids are capable of understanding money and saving by the age of about five or six.

With that in mind, here are some easy and practical tips to help children start their money journey so that they are better equipped to manage the financial challenges of adulthood.

Fun budgeting

Budgeting is one of the most important parts of money management and so it makes sense that it’s one of the big lessons kids learn growing up – and it doesn’t need to be boring.

Kids love playing games, so why not try and incorporate play into lessons about budgets. There are many board games and online games that make budgeting – and financial literacy – fun for kids.

This page on Mint’s website has a list of ideas to explore: https://www.mint.com/ultimate-resources-for-teaching-kids-about-money

Another method is to give children regular pocket money. This provides them with a chance to learn how to spend within their means as they know how much they will be getting and when. You might like to use the ‘three jars’ methods which encourages children to split their pocket money into three buckets – spend, save and give. It teaches them about allocating their money to different goals and uses.

Setting savings goals

Setting a saving goal – another very important financial skill – can also be more fun than it sounds.

For instance, you can help your child set a goal and track savings with a chart or, in the case of an older child, help them open a savings account at a bank. You might like to set a savings goal as a family – such as saving for a holiday – and you can track it online together.

When it comes to teaching about savings goals, experts advise parents to set a specific savings target with their child, have a clear savings plan and regularly review progress.

Other foundational lessons for kids include explaining how money is a limited resource, the difference between wants and needs and the concepts of credit and debt.

Make it engaging

Whatever the lesson, it’s no point teaching children money lessons if they’re not paying attention.

Keep it interesting by making learning part of daily life. For instance, you can get your child to help you write a shopping list, or perhaps go online with them to find the best price for a toy they want.

Other ideas include involving them in the planning of an event – perhaps a party, so they can see how to prepare a budget, cost their items and make decisions about what to spend the money on.

As Sunrise presenter and financial specialist David Koch puts it, “helping your child become a savvy money manager is all about teaching them how to take control of their money”.

Sources

  1. Financial Planning Association of Australia. (201). Share the dream: Research into raising the invisible-money generation. Retrieved from: https://resources.moneyandlife.com.au/hubfs/FPA%20Share%20the%20Dream%20Report%20-%20August%202018.pdf
  2. Friedline, T. (2015). A developmental perspective on Children’s Economic Agency. Published in the Journal of Consumer Affairs. Retrieved from: https://onlinelibrary.wiley.com/doi/full/10.1111/joca.12062

 

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