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Raising financially savvy children
Money is an important part of life. Teaching your children how it works and handy management habits when they’re young can set them up for success in the future.
5 minute read
Children start learning and developing habits very early, and like little sponges, they can soak up a lot from their surroundings. So it’s important to show them how money works, teach them healthy money habits, and help them foster a strong respect for the role money will play in their lives.
1. Start early and make it fun (ages 2+)
Learning how to manage money doesn’t need to be a chore. You can easily make it into a game with your young ones, teaching them while they play.
Young children can really enjoy playing imaginary shops, so simply include some play money in the game. You can then ‘buy’ items from their shop, handing money over to them and showing them goods need to be purchased and have inherent value. This can also have the added benefit of teaching them ‘making’ money can be fun.
After a few years, you can also walk them through what you’re doing when you take them shopping with you. Explain to them what you’re getting, what your budget is and why you choose some items over others, whether it’s for greater value or higher quality.
2. Have them earn their pocket money (ages 4+)
It’s a lot easier to teach children about money when they have some. That way, they can see it grow when they save it, and watch it dip when they spend it.
But instead of simply giving them money, teach them the value of earning it. Attach their pocket money to completing tasks like putting away dishes. The more activities they complete, the more they get. This will help link the earning of money to working for it.
They can then supplement this ‘income’ with additional part-time jobs when they’re at the appropriate ages, such as paper runs or dog walking.
3. Start with piggy banks before moving to bank accounts (ages 4+)
Younger children are quite visual, so the abstract concept of putting money somewhere they can’t see it (i.e., a real bank account) should probably be saved for when they’re a bit older.
But you can still teach them about putting their money aside using something physical, such as a piggy bank or glass jar. This will allow them to tangibly watch their money grow.
Once you think they’re ready, you can open a bank account with them and start showing them the ropes of banking online, such as opening a saving account and saving for a goal.
4. Teach them about saving, delayed gratification and giving (ages 6+)
Closely tied with point three, you can use the jars, piggy banks, or bank accounts to show your children the importance of saving, the time it takes to work towards a goal, and the reward of then reaching it.
Talk to them about something they’d like, such as buying a new toy, or game and turn it into a savings goal. Help them set a target amount to save, and add a picture of it to the jar or online account to make it more tangible for them.
In the time it takes them to save towards that goal they may decide they want to spend their money on something else. This will help teach them the difference between ‘wants’ and ‘needs’.
For charity or community donations, ask them about what’s important to them or a cause they’d like to support. Have them put money aside for giving in another jar, piggy bank, or account, so they have the money allocated. This also helps to teach children about budgeting.
Something else you can introduce is money-based games, like Monopoly. These kinds of games can help teach children the value of money, basic budgeting (or at least not spending everything at once) as well as the risks of overspending, but without any real-world implications.
5. Include them in family financial discussions (ages 10+)
When you have a family purchase to make, such as a new car, a renovation, or replacing an appliance, bring your children into the discussion. Depending on their level of engagement, you can walk them through what you’re looking at, what you need it for, and the research you’re doing.
Including them, getting their feedback, and listening to their suggestions will help them learn from your experience, meaning they’ll be better prepared when they’re looking to make their first big purchases later on.
6. Lead by example (all ages)
Your children will learn a lot from the actions and decisions you make, so it’s important to lead by example. Telling them they need to save diligently but then spending impulsively on wants rather than needs will undercut the valuable lessons you’re trying to teach them.
You don’t need to be perfect – no one is. Instead, teach them to separate their money into three groups; ‘spending’ for day-to-day and lower-cost impulsive buys, ‘saving’ for the more expensive wants, and ‘giving’ for presents or their chosen community or charity groups.
Handling money is a life-long lesson
We’re all continuously learning about money throughout our lives – no doubt, in the future, your children will teach you a thing or two about money.
But getting a head start on it when they’re young will mean they’re better prepared to spend and save wisely as they grow older. While these tips may start at young ages, they will extend out as your child grows.
Being able to openly talk to them about money when they’re younger should help give them confidence when they reach key money moments such as their first paycheck, moving out, and beyond.
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