Parenting is a tough gig! Thankfully it's also incredibly rewarding. During the years that fly past all too quickly (and sometimes not quickly enough!), we teach our kids everything from how to clap their hands to how to drive a car. Just like establishing good manners and social skills, 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 - starting with the basics that money is not unlimited and that saving and budgeting is important. It's certainly not surprising that what kids learn most 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. Just as important is ensuring that your kids understand the concept of "false economy" - in that the cheapest isn't always good value if it is not good for their health; or if the quality of the product isn't good and that having to replace the item in the short term is more expensive than investing in a more expensive product that might last for years longer (or have the potential for re-sale in the future!).
Paying pocket money pays off
Some valuable tools can also help – and pocket money is one such tool. While weekly pocket money given to children can very enormously, so too can the expectations of a child receiving it. Entitlement vs Earning is key - so asking kids to complete a few age appropriate tasks is a great way to teach children that money must be earned.
I know of many children who are very good at saving their money to purchase "big ticket" items, and I also know of others who have a tendency to constantly have the urge to spend. Therefore, as a parent you have a great opportunity to help your children develop their budgets or set savings goals - and this initial financial management activity can certainly help children to 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 (and many adults!) to understand the value of money. You could engage a variety of approaches to help your children understand the concept of cashless transactions - by showing them bank statement transaction listings, highlighting what you spent that day on groceries and petrol, for example, and how the balance of your account has gone down. With the introduction of new apps which provide you a notification every time you "tap and go", the visibility of spending is being brought back to our attention - something you can also show your kids. Similarly, simply showing them how to use the ATM and showing them the receipt and the reduction in your account balance can help them to recognise that an ATM doesn't provide an endless supply of cash! ,
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.