We saw this great blog article by David Koch recently – here it is.
My three-year old granddaughter has just started receiving pocket money. It may sound young, but she’s already interested in how money works and keen to spend it… whether it’s a sign of a financial genius or a shopaholic I’m not sure. Either way I reckon the earlier you begin teaching children about money the better chance you have of raising money-smart kids.
1. Start young
One of the greatest lessons you can pass on to your children is how to handle money. When your kids are pre-school age begin explaining what money is and show them the various shapes and sizes of coins. Tell them how you get money and what it’s used for.
2. Pay pocket money
The best way for kids to learn to manage money is to receive their own regular income from an early age. It will help them understand how much things cost and make choices between things they want.
When a child starts to understand the concept of earning money and then exchanging it for goods and services they are ready for weekly pocket money. For some kids this will happen as young as three or four, others might not be ready until they start school.
The amount you pay should be based on their age and what they do to earn the money. When my kids were growing up they had unpaid family chores like clearing the table and doing dishes. They then had specific pocket money jobs ranging from matching the family’s clean socks to washing the car. As your children get older what you pay also depends on what expenses it’s meant to cover.
3. Encourage saving
Children can begin saving as soon as they start getting pocket money. Ask your kids what they would like to buy with their pocket money. I’m guessing you’ll get told everything from a Barbie dollar to a first car. Explain if they put money away each week they will eventually have enough money to go out and buy it.
Get younger kids a fun piggy bank and put a picture of their savings goal on the moneybox as an incentive. You want it to be something achievable in the near term to keep their interest. My granddaughter is a Toy Story fanatic and has her own Ham piggybank she loves adding too.
Help older children do a simple budget on how their pocket money is being spent. That will show them, just like adults, where their money is going and how much they can afford to save.
4. Open a bank account
After your child gets the hang of saving for a year or two it’s time to open a savings account. The Commonwealth Bank’s Dollarmites Club for kids under 10 has been around since my kids were little and makes banking fun. St George Bank has a similar program, the Happy Dragon Club, for kids under 13.
5. Inspire teenagers to invest
There’s no subject at school teaching kids how to manage their own money and get out of consumer debt, they need life experience and your guidance. When your kids get to high school give them more freedom to manage their own money, particularly when they get a part-time job.
Start explaining the basics of investing and how they can grow their money by earning returns on their returns. A great way to inspire teenagers and get them interested in investing is to open a managed fund and commit to a savings plan together.
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