When is a good time to start teaching children about money? The answer is as early as you can.
The sooner you start discussing the value of money and saving and spending wisely, the earlier children will develop critical skills to help them build good financial literacy.
Adults, particularly parents, are children’s greatest role models. We teach children manners, respect, acceptance and many important life lessons, but few of us teach our children how to manage their money – one of life’s most important skills.
A good place to start is to think about and examine the attitude towards money you may be exhibiting to your children:
- How is money spoken about in your household – positively or negatively?
- Do you keep track of your money and do you explain this to your children?
- Are you in control of your finances or are your finances in the control of you?
You can start talking to kids about money when they see you using money – for example withdrawing money from an ATM or paying in cash. Another great time to teach kids about money is if they are given money as a gift.
Here are our tips for teaching kids about money:
Needs vs wants
You could start by explaining the difference between needs and wants. Put simply, a need is something you must have to survive; like food, water and a home. A want is something that’s nice to have, but you can live without; like an ice cream or a new skateboard.
Get kids involved
Get children involved in saving money on bills by showing them water and electricity accounts and talk to them about how to make changes (taking a shorter shower, turning off lights and turning appliances off at the power point for example). Talk about how a few changes have impacted usage and created savings for the family.
Set a goal
Setting goals with children teaches good money management habits and the value of working for money. Work with children to set goals that are achievable and realistic – and recognise when the goal has been achieved. Write down the goal and display it somewhere your child can see it. Track their goal and positively reinforce progress.
Explain a budget
It is important for children to be taught how to budget, save and monitor their spending.
Start kids off with our simple pocket money budget planner so they become familiar with the concept of budgeting. This planner allows kids to set a savings goals and track where their pocket money goes. You can download a copy at the bottom of this page.
Include older children in planning and managing the family budget (such as the weekly food and grocery bill) and choose a family goal, such as saving for a new TV or family holiday.
Save for a rainy day
Saving is an important concept to teach kids. It develops a habit into adulthood, where having an emergency savings fund creates a sense of security and empowerment. We can teach our kids to save for an item they want to buy themselves. Have a jar, box or piggy bank in their bedroom to encourage the savings habit.
Deposit savings into the child’s own bank account via a banking app or my personal preference is take your child into a bank to deposit cash so they can see their balance building.
The Australian government’s Money Smart website has some great tips for teaching kids about money.
Money skills are critical life skills. Start as early as you can to help kids develop good habits and knowledge from an early age. Foster those skills throughout young adulthood and support your kids to build financial literacy which will lead to better financial decisions throughout their lives.