One Saturday morning whilst having a coffee, my mind wandered back to my childhood. I remember my sister and I often asked our parents for money, to which the usual response was, “Do you think money grows on trees?” If we persisted though, we usually had our way.
Looking back now, I realise this was probably not the most effective method of teaching us money management. My parents must have done something right though, as I grew up with a great sense that money is in limited supply and I must to be careful managing it.
Teaching children to manage their own money is very important. The Government’s Money Smart program provides some great school-based resources to assist children with managing their money. There are also some terrific ideas for around the home.
Here are my top 3 tips for children:
1. Start Early
Always remember it is never too early to start teaching your children about money. Show them how much they can buy with a small amount of money by taking them to the shop to buy the newspaper. Talk to them about the difference between ‘a need’ and ‘a want’.
2. Encourage Them To Save
Sit down with your children and write a list of what they what to buy. Discuss with them how much pocket money they need to set aside each week, and how long it will take for them to have enough money for the item on their list.
There are two ways this can be done:
• Encourage them to put their savings into a clear jar, so they can see their savings grow.
• Open a savings account for them and take them in to the bank to deposit their money.
Budgeting is an important skill for everybody to learn. It doesn’t mean you need to draw up a formal budget. Some tips given by Money Smart include:
• When giving children pocket money, give a combination of coins and notes. This will assist them in learning how to handle different sums of money, and will also allow them to put some coins toward their savings straight away.
• Give them a small amount of money at the shop counter and let them check if the change is correct.
• When they are a bit older, tell them what you need, send them to the shop with a set amount of money and let them keep the change. This will make them consider different brands, prices and, in some cases, bulk buying.
Money Smart also has many great tools and calculators to assist in teaching your children about saving and budgeting. It doesn’t matter which method you choose to teach your children about money management, the important thing is to start early. Like many things, looking after money becomes a habit, and once learnt it is not forgotten.
By Ash Irwin, Associate Financial Planner
Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.