Do Your Children Understand the Value of Money?

Every parent wants the best for their child – quality education, good health and a safe home are all important aspects for a balanced life. However, what many parents do not realise is that the future success of their child also depends on excellent comprehension of the value of money and how to handle finances.

Your child might be in nappies now, but even at an early age, you can teach positive financial behaviour. With thousands of young Australians finishing education in debt, your actions now could help to build a stronger future for your child and hopefully prevent them experiencing the debt/poverty cycle which many now face. Thanks to lifeinsurancecomparison.com.au for the inspiration on this article idea!

Photo: RoarPett

Your Attitude Counts

Wake up to the fact that your attitudes to money and spending will rub off on your child. If you are an impulsive spender, your child will pick up on this and imitate your behaviour, which could cause problems when they become independent. Today’s parents create the financial issues of future generations, so take some time to think about your relationship with money, and what you can do to make it healthier.

Teach With Real Life Scenarios

A simple way to teach a child about how to keep up with financial responsibilities is to demonstrate how you handle your household bills. This is a lesson they will take forward into adult-life and works well because it builds on real life scenarios. Why not show your child that you keep a record of how much money you will need to pay your bills and prepare to pay them by putting money aside for this purpose. Explain what the outcome of not paying bills is, and why sometimes you might have to do without luxuries or extras in order to stay up to date with essentials. For example  – “If we don’t pay the electricity bill, the electric supply to our home could be cut off. So we wait until next month, when we have more cash, to go on holiday for the weekend”.

Another way to teach your child about budgeting is to take them to the grocery store with you. Before you set off, sit down together and plan a meal, discussing how much different ingredients cost and setting a total spend. While you are in the shop, point out prices on shelves, and show your child how to work out which products are the best value by comparing weight per kilo or 100g, as this gives a more accurate result than simply looking at a price per packet or jar. A calculator may be helpful here, especially if mental arithmetic is not your forte! As the kids get older and become more confident, you can even give them a budget and let them plan and shop for a meal by themselves!

Should You Give Pocket-Money?

Giving your child pocket-money has its advantages and can help teach youngsters how to save up for things that they want. The idea behind pocket-money is to only give a set amount of money to your child each month, and be clear that once they have spent it, they won’t get any more.  Thus, if they want something which costs more than they can afford with one pocket-money payment, explain to them that they can put some or all of the money aside each week until they reach the necessary amount. Removing the “instant gratification” of buying children everything they want, the moment they want it, teaches important life lessons.

How much pocket-money you give is a personal choice which relates to what you can afford and what you feel is appropriate according to the child’s age. You need to be specific about what the child must use the money for – little kids might be told that their allowance will pay for their lollies and small toys, while teens might be given a larger allowance and told they must use it to buy clothes and books for school or pay their own mobile phone bill.

Should you give kids pocket-money as a payment for doing chores? Some parents think that this is the wrong route to take, as a child should be taught to be a useful member of the household and not expect payment for helping out with something which is their responsibility. But the choice is ultimately up to you.

Teach Your Kids to Save

If your child receives gifts of money from friends or family, encourage them to put at least some of it aside in a savings account. Most banks offer child friendly accounts which are designed to make finances fun(and no risk of overdraft!), so let your child sign up to learn the benefits of saving money.

Earning a Wage

When your kids reach their teens, getting them interested in earning their own money teaches good habits for the future. The legal minimum working age varies throughout the states, so check the legislation in your area for details. Parental consent is normally needed when a child applies for a job, and the number of hours they can work is strictly regulated. Allowing a child to work can help to build their confidence throughout all aspects of daily life – and there is nothing more satisfying for the young worker than that first pay-check!

The wonderful thing about investing time to teach your child about money, is that you may learn something too. One day your youngster may even pipe up with “But Mummy, why do you do XYZ with your money, when you can save cash doing it like this?” That different perspective may well show you that there is always room for improvement!

Tags: featured, frugal life, kids

Category: Children