How to teach your kids to care about money
What skills does a child needs and when should you start teaching them.
We know learning about money from a young age can set a person up for life, but what skills does a child need to grasp first, and when should you start teaching them?
There are three key focus areas to help your child become financially secure and confident in their lifetime:
How to save
Kids can’t learn to save if they don’t learn to earn first.
Once your kids are able to help out with chores around the house, look at your own family budget to see if you can pay them some ‘pocket money’ for their help. It’s fundamental kids understand the connection between working and income. If they don’t work, they don’t get paid and vice-versa.
Work with them to set some financial goals they’d like to work towards with their pocket money. Through some simple maths, you’ll teach them the value of their hard work.
Once your child knows what their money can achieve for them, help them track it week by week until the goal is reached. A good idea is to put a picture of their goal on the fridge so you can always point to the picture when they’re struggling to do those chores.
How to avoid bad debts
With the rise of “buy now, pay later’” (BNPL) lenders, such as Afterpay, many Australians have lost the connection of paying for something they want or need. While credit cards are still seen as bad debts, this same perception hasn’t been associated with BNPL lenders. Speak openly about this with your children and encourage them to always save instead of going into debt for an item.
You can help them understand this concept by discussing how you budget for items like groceries. Talk about why you’re purchasing one thing over the other or why you’re looking at discounted products instead of full price.
Try and alternate between paying with card and cash so your kids can see the connection between the “invisible” money and cash. It’s helpful for kids to see that things cost money and that essential purchases like groceries come before ‘fun’ items.
How to make smart purchases
Impulse spending and binge buying can be difficult habits to change when you’re older so encourage your kids to practice patient purchasing.
Ask them to think about the purchase for at least 24 hours or even a couple of days. If after that time they still want to make the purchase and have the money to do so, you know they’ve made a well thought out purchase.
If your child has asked for something beyond the current budget, give them a few options. If they ask you to purchase something for $100 and they receive a weekly allowance of $25, ask them if they need the item straight away, or if they can wait the time it takes to save up the money themselves.
Another alternative may be asking if they’re willing to go halves or if they’re willing to do more chores and earn the money for the item. This provides your child with choice and helps them learn that spending money comes with choices and trade-offs.
As with any new skill it will take time so be patient and, before you know it, your kids will be on their way to their own financial wellbeing.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.
RACQ Financial Planning Pty Ltd (RACQ FP) is a Corporate Authorised Representative (Representative No. 293929) of Actuate Alliance Services Pty Ltd (Actuate), AFSL 240959, ABN 40 083 233 925. Actuate is wholly owned subsidiary of IOOF Holdings Limited ABN 49 100 103 722.