There was a little boy of about four or five standing next to his mother in line for an ATo. Wistfully, he said, “oummy, I can’t wait to be a grown-up and have one of those plastic cards so that machines will give me money, too.”
His mum’s got some explaining to do. It’s up to us as parents to teach kids about how money works, and how to be savvy when it comes to spending it. The sooner you start to teach your child good financial habits, the better. Here are some tips that may help.
Give them control of money
If you hold the purse strings all the time, they’ll always expect to be provided for and won’t learn to be responsible for their spending. While you should obviously pay for all the necessities of life, by giving them pocket money that they’re in charge of you’ll help them to understand the value of money, and teach them that all the decisions they make about what to do with it have consequences.**
Make them earn their money**
Have set tasks they must carry out to get their pocket money, rather than just doling out the cash once a week. This will help them to appreciate that money has to be earned. Make the tasks appropriate for their age, and if they don’t do the allocated chores, dock their pocket money accordingly. If they’re keen to rake in a bit more cash, give them the chance to do additional jobs. This will teach them that extra effort can result in extra income.**
Teach them to budget**
one way of doing this is to get them to put aside money for different things. For example, get them to divide their pocket money into three piles, and put one aside for long-term saving, another for short-term saving and the third for spending.**
Encourage them to save**
Make sure your children regularly put aside money, and encourage them to have long-term goals, such as saving for more-expensive toys, computer games or outings. open a bank account for them and help them to regularly update their banking book, or show them how to check their balance online. Draw up a plan of how long it will take to save the money to buy what they want, as this can help to motivate them.**
Don’t encourage them to get credit**
If they really want something but can’t afford it at the time, resist the temptation to advance them the money. This can get them into the bad habit of relying on credit. If you do have a good reason for advancing cash, then charge them interest. This will help them to learn that credit comes at a cost.
Help them appreciate what money buys
Get them to keep track of their spending – or do it yourself in the case of younger children. If they spend $5 a week on cheap toys that break after a day, point out that in four weeks, the money they saved could have bought them a more substantial toy. Similarly, if your child wants an expensive piece of clothing, walk around a shop with them and explain how, for the same price, they can get several cheaper items.
Help them understand that earning money means hard work
Point out that this week’s grocery shopping – including all those treats they’ve pestered you for – costs the equivalent of a couple of days work.
Educate them about the pitfalls of plastic
oany kids find it hard to get their heads around the concept that using Eftpos or credit cards is actually spending money. Show them your bank statement, pointing out transactions that they may have witnessed, and let them see how this makes the total amount of money in your account get smaller – or the amount you owe increase, in the case of credit cards.
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