Teaching Children about Money

We are at a point in time where the prevalence of physical money is a rarity. Gone are the days when people got paid in cash or held significant amounts of it in their wallet or purse. The ease of swiping or tapping your card has introduced an extremely efficient way to ensure you have always got money on hand. With 99% of businesses allowing the use of EFTPOS, and that number is growing, it has never been easier to make a purchase without the need for cold hard cash.

One draw back of this electronic age, is that it is now much harder to teach our younger generation about the significance of monetary skills such as saving, investing and consumerism.

Here we will go through some sound techniques that will help your children learn the importance and the consequences associated with handling money.

Start while they are young

Most young kids will just assume that all you have to do is tap the card to get what you want, without realising the cost involved in the process. The actual cost associated with a purchase made electronically with a card or as a bank transfer is much less visible to kids since there is no physical transfer of money to the vendor.

Coins and notes can really help while they are young as it gives them that visual cue that money is spent when it is handed over to purchase an item. As they get used to it and begin to understand, teach them that other forms of payment such as debit cards exist, and are in essence, exactly the same.

Instead of pocket money, devise chores to earn it

Teach your children that money needs to be earnt to facilitate buying the things that you want. Giving them a weekly allowance does nothing but teach them that money is free. Chores such as cleaning their room, emptying the dishwasher and mowing the lawn are all good examples of jobs your kids can do to earn some money, while also freeing you up for other things that need doing. Chores will also teach your kids why people need to work and will give them a more fulfilling sense of accomplishment as they start to save their earnings.

Teach them about saving money and set the example

Using a see-through piggybank is a great way to show your child how to start saving as they will see the amount inside it grow. Opening a bank account and depositing regularly is also a great way to show kids how to save money; especially considering that these days it’s mandatory to have an account for your income etc. Set the example and show them that you also put money into your savings, and they will be more inclined to do it as well. 

Investing rather than instant gratification

Consumerism only helps to inhibit your ability to grow wealth in the long term. Along with saving your money you should also teach your children the importance of using investment strategies to help grow their wealth. The instant satisfaction of purchasing a new toy or item of clothing is fleeting. A good way to prevent them from buying impulsively is to ask them to wait until the following day before they make the purchase. You will find that the hype and “need” for it may have subsided drastically.

Opening an account with shares held in trust for your child is a great way to give them a head start. One of the biggest advantages an investor can have is time, of which your child has a lot. Looking more into investing in different areas will also let you yourself gain some more knowledge in the area, and perhaps help your own ability to acquire more wealth.

Teach them about bills and budgeting 

As your kids get older, you should teach them what it means to create budgets and use their saved-up funds to pay for certain bills (even if you reimburse them later). This makes them more accountable and may help prevent them from splurging on an unneeded impulse purchase. You could get them to pay for their phone bill, or if they have a job of their own, you could charge them a portion of rent to embed skills that they will require to function successfully financially when they move out.

 Teaching your kids about the value of money should be a high priority. Understand that those little eyes on you are very observant and they are likely to pick up similar habits that you have with regards to saving and spending.  Be a role model for your children and develop good habits yourself. Otherwise, how can you expect your child to be financially dependant if you can’t even do it yourself.

If you have any questions or want to know how we can help you, and your family feel free get in touch on 0423 313 486 or kate@solacewealth.com and book in for your complimentary consultation.

Kate Trost

Senior Financial Adviser and Director of Solace Wealth Management (AR numbers 465078/1262350)

Authorised Representative of Avana Financial Solutions (AFSL 516325).