Teaching your kids the value of money
Wednesday, 13 July 2022
As the saying goes, it is often easier to “learn by doing”. This extends to most areas of life – including how we learn healthy money habits. Teaching your children the value of money and the importance of budgeting is an essential part of becoming an adult, particularly if they have just started earning for themselves.
However, with the nations household debt on the rise, getting on top of healthy habits while young is the key. But how do you do this? Take a look at these tips on the value and importance of saving and budgeting, which might be handy to share with your young ones.
Introduce pocket money
One of the first things you can do to get your kids thinking about where money comes from is to introduce pocket money, which can be done by rewarding them for small jobs that they would not normally do. Do the leaves need raking? Can they help wash the car? Or would washing and drying the dishes be a better fit?
Occasionally you’ll still see the old ‘lemonade stand’ make an appearance in your street. Does your child have an entrepreneurial spirit? What ideas do they have that you could encourage? Could they ask a relative if they need help with jobs?
By assigning each chore a monetary value, your children will know what they need to do to earn their allocated pocket money. Also, as kids reach late-primary school age, paying pocket money digitally can help show them how to keep track of where each dollar goes.
Start saving with three jars
For those with younger children who may still be receiving cash for chores or birthday money from grandparents, a popular idea is to create three jars: one for saving, one for spending and one for sharing. Essentially, these jars mimic how many might structure their bank accounts.
The savings jar is for longer-term goals, and where a portion of their money should go – especially pocket money still given in cash. The spending jar is short-term, and the money in that can be used for fun or more impulsive purchases. The sharing jar is all about teaching them the art of giving. When the jar is full, after putting a small portion of their pocket money in this jar each week, allow them to pick a charity that they are passionate about helping. The three-jar method is an easy way to introduce children to the idea of dividing their money, budgeting and having long and short-term savings goals.
Help them set goals
A great way to illustrate the concepts of time and money is to track their efforts on a timeline. Let’s say your child wants to save for a new Lego set. Grab a large piece of paper and record each time money goes into their savings account from $0 to the goal amount. Keep this in a prominent place, such as on the fridge door. This is a fun way for them to see how much they’ve saved and how far they’ve got to go to reach their goal.
Open a bank account
As your children get a bit older and are potentially even looking at taking their first part-time job, it might be a good idea to open a bank account. By helping them deposit their money into their own account they’ll gain a better understanding of how money works – especially in a world that is increasingly moving towards cashless purchasing.
A bank account can also help you to keep track of finances together and to start the conversation about carefully planning and saving for any future buys. You could also discuss ideas like opportunity cost. Help them understand they cannot automatically get everything they want, there is often a trade-off. It will also help them to understand that digital money is still hard-earned money, and in order to stay ahead financially, you need to be spending less than what you earn.
Don’t forget that your children are learning from you, so showing them how to prioritise needs versus wants will help them make wise choices when it comes to spending their own money.
Give ‘real life’ examples
As your children reach early adulthood and nearing the stage where they might be looking to move out, it is a good opportunity to really demonstrate the true cost of living expenses. By showing them copies of your utility bills they will be able to see how much essentials such as electricity, water, gas, and insurance actually cost. You might even find them turning off the lights or power points after years of asking!
Educating kids about money is about building financial awareness into everyday situations. Opportunities to talk about money are everywhere.
However, with the nations household debt on the rise, getting on top of healthy habits while young is the key. But how do you do this? Take a look at these tips on the value and importance of saving and budgeting, which might be handy to share with your young ones.
Introduce pocket money
One of the first things you can do to get your kids thinking about where money comes from is to introduce pocket money, which can be done by rewarding them for small jobs that they would not normally do. Do the leaves need raking? Can they help wash the car? Or would washing and drying the dishes be a better fit?
Occasionally you’ll still see the old ‘lemonade stand’ make an appearance in your street. Does your child have an entrepreneurial spirit? What ideas do they have that you could encourage? Could they ask a relative if they need help with jobs?
By assigning each chore a monetary value, your children will know what they need to do to earn their allocated pocket money. Also, as kids reach late-primary school age, paying pocket money digitally can help show them how to keep track of where each dollar goes.
Start saving with three jars
For those with younger children who may still be receiving cash for chores or birthday money from grandparents, a popular idea is to create three jars: one for saving, one for spending and one for sharing. Essentially, these jars mimic how many might structure their bank accounts.
The savings jar is for longer-term goals, and where a portion of their money should go – especially pocket money still given in cash. The spending jar is short-term, and the money in that can be used for fun or more impulsive purchases. The sharing jar is all about teaching them the art of giving. When the jar is full, after putting a small portion of their pocket money in this jar each week, allow them to pick a charity that they are passionate about helping. The three-jar method is an easy way to introduce children to the idea of dividing their money, budgeting and having long and short-term savings goals.
Help them set goals
A great way to illustrate the concepts of time and money is to track their efforts on a timeline. Let’s say your child wants to save for a new Lego set. Grab a large piece of paper and record each time money goes into their savings account from $0 to the goal amount. Keep this in a prominent place, such as on the fridge door. This is a fun way for them to see how much they’ve saved and how far they’ve got to go to reach their goal.
Open a bank account
As your children get a bit older and are potentially even looking at taking their first part-time job, it might be a good idea to open a bank account. By helping them deposit their money into their own account they’ll gain a better understanding of how money works – especially in a world that is increasingly moving towards cashless purchasing.
A bank account can also help you to keep track of finances together and to start the conversation about carefully planning and saving for any future buys. You could also discuss ideas like opportunity cost. Help them understand they cannot automatically get everything they want, there is often a trade-off. It will also help them to understand that digital money is still hard-earned money, and in order to stay ahead financially, you need to be spending less than what you earn.
Don’t forget that your children are learning from you, so showing them how to prioritise needs versus wants will help them make wise choices when it comes to spending their own money.
Give ‘real life’ examples
As your children reach early adulthood and nearing the stage where they might be looking to move out, it is a good opportunity to really demonstrate the true cost of living expenses. By showing them copies of your utility bills they will be able to see how much essentials such as electricity, water, gas, and insurance actually cost. You might even find them turning off the lights or power points after years of asking!
Educating kids about money is about building financial awareness into everyday situations. Opportunities to talk about money are everywhere.
