Teaching your child how to manage money can set them up with good financial habits and behaviours for life. In a constantly changing financial environment, helping your child understand basic money concepts, and providing opportunities to practice them safely, can have a big impact on their financial literacy. Here are some ways you can help your child to develop a healthy financial future.
Money doesn’t grow on trees
We all heard this saying growing up because it’s an important life lesson. You can help your child understand the relationship between earning money and making decisions on how to best spend it by discussing working to earn it, factors that influence spending decisions and saving.
Talk about ways to save money (such as reducing electricity and hot water use or cooking instead of ordering takeaway) and how that will contribute to spending (such as a family holiday or birthday party). This will introduce the concept of finite money in a practical and relatable way. It will also introduce the difference between needs and wants. Children have so much exposure to advertising so being clear about what is a need versus a want is important to help them understand choice and value.
Purchase goals and saving
Around the time your child starts school you may choose to give them some weekly chores or jobs around the house in exchange for some pocket money. This is a great opportunity to expand on the concepts of value, earning, spending and saving.
Once they start to earn pocket money let them make their own decisions and mistakes on spending it. You will soon have an opportunity to introduce the idea of saving that money for a few weeks to buy something bigger and better. Make saving fun by mapping out how long it will take to save for the item and charting it week by week.
Make money and transactions more visible
Transactions are not as transparent as they used to be with cash. Talk to your child about transactions at the cash register so that they understand what is happening when your swipe your EFTPOS or credit card.
Albert Einstein said that play is the highest form of research. When you do use cash at a register let you child help by handing over the money and counting the change. Use money in counting games or in role playing situations where they get to pretend they’re a shopkeeper or customer.
You should also explain that when you withdraw money from an ATM it’s your money that you’ve earned and saved. Let them know that the bank keeps it safe for you and you need a special pin number to access it.
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