Being a parent comes with a raft of responsibilities. Over years that fly past all too quickly (and sometimes not quickly enough), we teach our kids everything from how to drink out of a cup to driving a car. We can also teach the basics of good money management – skills that stand youngsters in good stead for life as an independent adult.
Daunting as it may seem, it's never too early for parents to start discussing money matters with children. A study by Cambridge University1 found children's basic attitudes to money are formed by age seven, and much of what kids learn about money simply comes from watching and listening to mum and dad.
That makes family discussions about money very important. When supermarket shopping for instance, encourage children to look at unit pricing to help decide which items offer better value. Show them how you set your own money goals, and maybe share a few of the money lessons you have learned along the way.
Paying pocket money pays off
Some valuable tools can also help – and pocket money is one such tool. While the average weekly allowance for boys and girls is $8.26 - or $429.52 a year per child, only three in five children (57%) have to do chores in exchange for their allowance2. Yet asking kids to complete a few age appropriate tasks is a great way to teach children that money must be earned.
On the plus side, Aussie children are showing they've got great savings skills, tucking aside the majority (56%) of their pocket money for big ticket items rather than spending it3. However, only one in two parents help their children develop budgets or set savings goals4 and this is an area where children can develop valuable skills. Try explaining to your child how much he or she needs to set aside each week to reach a particular savings target. Encourage your child to make saving their top priority, leaving spending on treats or hobbies to any pocket money left over.
Mastering our cashless society
Digital transactions can make it harder for youngsters to understand the value of money, and research shows one in five parents are using a variety of approaches to help their children grasp the concept of cashless transactions. Parents are alternating between cash and online bank transfers when paying pocket money, others actively demonstrate ‘tap and go' technology when out shopping, and some diligent mums and dads show their kids how ATMs work5.
These are all important lessons for children. After all, it's a more complex world than when most of us were growing up. But the value of sensible money management hasn't changed, and investing in your child's financial literacy can encourage your son or daughter to adopt money smart strategies of their own throughout their life. Something as simple as opening a junior savings account for your child, and having open conversations about how interest works and the magic of compounding, can spark your youngster's enthusiasm for good money management.
If you feel your own money matters could be improved, or for ideas on getting your children started with financial literacy, call our office for expert advice.