Tip #1 They need to learn how to save
Something they can see every day and an amount that they are not going to miss, and finally make it regular (weekly for example when paid pocket money).
The traditional piggy bank is a great idea but there are plenty of different types on the market now which split savings into different categories such as one for now (spending), one for later (saving) and one for charity (giving). Once your child has saved money, you will need to consider what to do with it. Various savings vehicles or Apps are available to take advantage of competitive interest rates and even the wonderful power of compounding interest!
Tip #2 You don’t get something for nothing
When your child receives pocket money, this should be in part teaching and encouraging a good work ethic. If they don’t complete their chores for example, they don’t get paid, it’s a great lesson to learn. Children often see the ATM as this endless cash machine, so you do need to explain that the ATM holds the money you have made by working hard and saving, and once taken out of the account it goes down, just like the piggy bank if you take money out.
Tip #3 Set goals that are achievable
Help your children to set goals and track their savings (a chart or something similar works well) and their spending to ensure they stay on target. Importantly, celebrate these wins as important to reinforce good saving habits. These future goals or wish lists need to be achievable, not overly complicated (such as special toys, video games etc) and in a relatively short period of time as children will not yet grasp understanding of ‘long-term’.
Tip #4 Teach them about shares and property
We know what you’re thinking, this seems way too complicated, but you would be surprised how quickly children understand how all this works, and the earlier the better. Explaining the concept of borrowing money to buy a property for example and then watching your money work for you and watching that asset grow is a great life lesson. There are many great games available online on the ASX website or your children’s school may have resources available to understand more about these types of assets.
Tip #5 Parents have to be involved
Teaching your children about money at any stage can only be a good thing. As a parent you should get involved and improve your own money basics as well.
Importantly, these lessons will be with your children for life so whatever energy you spend to help teach them now, will not be wasted. Learning the value of money, just like learning the value of good financial advice, can help let your children and you, make smart choices about money every day of your life.
For more great tips, I love this new CommBank initiative KIT for kids. This link takes you to lots of great articles to help you teach your kids to be better with money https://www.heykit.com.au/learn-it.
Good luck, and happy saving!
Article by Marc Bineham – Money coach, speaker and award-winning author of The Money Sandwich