October 10, 2015
Aussie kids are raking in the dollars, and that gives parents an opportunity to help youngsters develop healthy money habits.
Recent research shows around two-thirds of the nation’s children receive pocket money – often at impressive rates. Parents fork out an average of around $7,016 per child in pocket money over the course of a youngster’s childhood, with ‘pay rates’ ranging from around $5 a week for toddlers, through to about $15 dollars weekly for teens.
Money habits are formed by age 7
Pocket money can be a highly effective tool to help children develop the habit of saving, and even very young children can pick up the basics of sensible money management.
Indeed, a ground breaking Cambridge University study found our money habits are often formed by age 7. By that stage most children recognise the value of money; they understand that money can be exchanged for goods; and importantly, by age 7 most children are capable of complex functions such as planning ahead.
The same research found children learn the bulk of their money habits from mum and dad, which reinforces the need for parents to adopt a sensible approach to money. However adding to the challenge for modern families is the increasingly cashless nature of our society. Sliding a card into an ATM or EFTPOS terminal makes it harder for children to grasp the value of money and the concept that income must be earned.
Mums and dads lend a helping hand
The good news is that money smart parents are using a variety of ways to help children gain hands-on experience managing money. One in two Australian children have their own savings account, and one in three kids - no doubt encouraged by their parents - take on a few extra household chores to earn a bit more pocket money.
Simple strategies can teach habits of a life time
For parents hoping to encourage healthy money management in their children, some simple strategies can go a long way towards developing key financial skills that could last a lifetime.
Start by encouraging children to complete age appropriate tasks in return for pocket money. Talk to kids about how they will use the cash, and explain how tucking part of their money away on a regular basis makes it easier to save for big ticket purchases, like a push bike, that provide lasting value.
Kids can earn man-sized interest
When it comes to savings accounts, children can enjoy a real advantage over adults, with some junior savings accounts paying interest of more than 5% – a return on cash many adults can only dream of.
There can be strings attached including limits on the number of withdrawals your child can make to earn a high rate of interest. These sorts of conditions can encourage children to save rather than spend though be sure your youngster can manage any conditions when you choose a junior savings account.
For more information on helping your kids become money smart, or to get on top of your own finances, speak with a Mortgage Choice broker or financial adviser today by filling in the form or calling us on 03 9748 7999.