Teaching your child good money habits and the value of money should start early. Parents can influence how their children view money in different ways. Teaching your children to manage their money allows them to not only create good financial habits, but also helps them to grow into financially savvy adults. You might even learn something about your own money habits along the way. Money is exposed to children almost every day, as they grow older, they will start recognising the currency value on coins and notes. We recommend following tips across the ages:
Kids Aged 4-8 Years
Children are starting to learn what money is, what it looks like and what it is used for. It’s at this stage that the explanation of why adults go to work should come into the conversation. Also explaining the difference between needing and wanting and how that relates to money and how it’s spent. I recall an instance when one of my children threw a tantrum when they couldn’t have a new toy that they wanted and couldn’t understand why I couldn’t just ‘use my card’ I had to explain that just because I was using a card, did not mean that it had an endless stream of cash attached to it. A good way to help children understand how money works even when they can’t see it, is to sometimes pay for things in cash, show them an item and then show them the exact value of that item in cash. You can also say, “Today I am going to pay with this card, and it is exactly the same as if I were paying for it with this money”.
Moneybox
4-6 is a good age to introduce a small amount of pocket money and pay them to do age-appropriate chore. Encourage saving by giving them a moneybox and acknowledge their desire to spend some of their money by giving them a wallet or purse. This will help them understand the different functions of each and the value savings has to offer.
Kids Aged 9-13 Years
Open a bank account
As your child gets older, open a bank account with them in their name. Take them along for the experience. Dollarmites accounts (available at Commonwealth bank) are still active in many schools with a dedicated day for banking. You can help your child understand what interest is and how it works and talk about their saving goals. For example, if they want to buy a new bike or video game, discuss how much it will cost, how much they will need to save each week and how long it may take to reach this goal.
ATM withdrawals
Once your child is old enough, introduce them to their bank statements and point out any fees and charges. When making ATM withdrawals, show them the receipt and explain how the balance has reduced. Many children often assume that ATMs supply an unlimited amount of cash. Usually banks don’t allow children access to eftpos cards until the age of thirteen.
Apps
There are several apps available now that allow parents to distribute pocket money to kids. The benefits of these apps include:
- to transfer money instantly
- eftpos card to use their money how they wish
Spriggy is a great app for kids who are too young to have an eftpos card from a banking institution. Money is transferred instantly to your virtual Spriggy ‘wallet’ from a parent bank account to then you can distribute to your child’s Spriggy account. ‘Spriggy Jobs’ allows you to build your kids earning skills by completing a set of jobs which can be paid or unpaid, one off or reoccurring. You can also setup automatic transfers once jobs are completed. Spriggy fees are $5 per month. If you are keen to set up an account, use https://get.sprig.gy/i/BIANW19 for a $5 credit when you sign up.
“Plastic” works
Once your child becomes a teenager, they will most likely get their first part-time job. A standard way for teenagers to earn money and choose how to spend it. Giving your child a debit card to their bank account will give them an early introduction to how “plastic” works – particularly when it is exciting to “tap and go”. Except with a debit card, when the account is empty, it is empty. You may have to resist the temptation to top up their account.
At this age, you should never just ‘give’ your child money. They need to understand that money is earned, and certain things have to be paid for. Instead, help your child understand that with work they can earn their own money. it’s important that tweens be aware of the family budget. Let them be aware of household spending and the decisions being made, but don’t worry them with topics that create stress. A great exercise to help with understanding budgeting is to give your tween the task of purchasing items to make a meal for the family. They need to stick to the budget but still be able to purchase everything required on the list. They will have to decide which items to select as there are multiple choices for many products, all with differing price tags.
If you feel comfortable, show your budget spreadsheet to your kids and get them to do the maths to see how much is left over each month/week/fortnight. No doubt it will be a big eye opener, not to mention it will give them an appreciation for the work you do.
Teens aged 13-18
Learning about trade-offs
Say your 13-year-old had $300 to spend over the school holidays. You tell her it is up to her how she allocates it, but once it is spent there will be no additional money. Watch to see if she makes financial choices and trade-offs that adults make every day, such as, “If I buy these shoes today, I can’t go to the movies. It’s important that children learn from experience and are given the opportunity to make their own financial decisions and mistakes.
Encourage your teen to get a part-time job.
A part-time job is a fantastic skills-builder. If you think they’re ready, then encourage them to start working. There’s so much to be learnt from a part-time job aside from money. Building connections, learning responsibility, customer service skills and manners are important stepping-stones to adulthood.
Help your children save with incentives
perhaps for every dollar they save, you can give them 20c interest to help boost their savings.
Stick to the principles of budgeting.
Reward good habits, not bad. If they blow their budget, don’t lend a helping hand by giving extra money. Sure, they may get upset if they don’t have enough to go to the movies on the weekend. But the greatest learning is often found in failure, so allow your teen to stumble. They will learn from it.
The most important thing to teach about money is not to spend every cent they get. A good rule to follow is to have your children save 30-50 percent of all money they receive. Try to enforce this rule as early as you can because it’s habit forming to start saving at a young age. Soon it will become something they don’t even think about, they will just do it.
Useful Apps
ASIC’s Money Smart’s free app, TrackMySPEND, helps teach people of all ages to keep track of their expenses on the go.
Green$treets Unleash the Loot! allows kids to choose a cute endangered animal to rescue, then earn and save money to take care of it.
RoosterMoney helps families manage pocket money, chores and rewards and teaches children the value of saving.
Spriggy helps teach children 8 to 18 years how to make better money decisions. They get “a personalised prepaid Visa card” that provides them with a way to learn real-world money skills while their parents keep an eye on their transactions through their own dashboard. https://get.sprig.gy/i/BIANW19
References:
Reserve Bank of Australia – https://www.rba.gov.au/statistics/tables/
