Education around effective money management is sadly lacking in Australian school curriculums. So it’s up to us as parents to pass on our own personal life lessons learnt from both good and bad experience and the mistakes we make along the way.
By doing so, you stand to make those major life transitions for your child a lot smoother; from tiny people to responsible teens and finally, successful and self sufficient adults in their own right.
Culturally, we seem to have some strange ideas around keeping our financial affairs a secret from the rest of the world, including our kids.
But ‘sharing is caring’, as they say, and when it comes to teaching fiscal aptitude, the best approach is one of honest participation in the daily mechanics of the household budget.
Too many of us think our children shouldn’t be exposed to the potential stress of ‘balancing the books’. But sheltering them from reality gives them a false perception of how the world works.
Here are 13 ways to teach your child about better money management in the ‘real world’, and set them on a path of affective planning and goal setting to realise their own wealth success and develop a healthy relationship with their wallet.
1. Be a role model
Show your child how you budget, calculate the weekly grocery bill and importantly, save a little out of each pay packet. Take them to the bank and explain what you’re doing and why, when depositing a portion of your wage into a savings account.
2. Encourage participation
Ask them to help add up how much you’re spending at the supermarket and discuss what it means to save money by purchasing bulk items or discounted products.
Make the experience fun for older kids by giving them a calculator to check whether you’re trolley tally falls within the weekly budget.
This exercise demonstrates the importance of planning and will also give them a greater appreciation for the value of the food you put on the table each day.
Revise the household’s income and expenses in your children’s presence, discussing how turning off the lights and saving electricity is not just good for your bottom line, but the planet too!
3. Give them pocket money
As adults, you work out that money doesn’t just fall into your lap. The concept of trading a skill, product or physical labour for payment is one that all children would do well to understand from a young age.
Pay your child an allowance so they can start working to their own personal budgets, rewarding their efforts in completing allocated household chores. They’ll soon learn that money can buy things we desire, but first you have to earn it.
4. Give them something to save money in
A piggy bank is ideal for younger children, while glass jars that allow them to easily measure progress and portion their money according to their own budget plan are very effective visual aids.
When they get their first visit from the tooth fairy, or $20 note in a birthday card from Aunt Gladys, take them to open up their very own savings account, just like mum and dad.
5. Make it fun and rewarding
The last thing you want to do is relay a feeling of dread every time the subject of money comes up for your child. So it’s important to keep this learning process as light as you possibly can.
Think games like Monopoly that impart the wisdom of using money wisely, without stern lectures. Accentuate the positives and encourage exploration of the technology they’re so at home with, like the Internet and mobile apps, to learn more about financial literacy.
6. Teach them how to set goals and budget
Goal setting is a critical life skill that most people seem to fail dismally at. Set your child on the best possible path by showing them how to establish clearly defined objectives and then work towards achieving them, measuring success along the way.
Demonstrate how to apportion money they earn toward relevant, pre-determined purchases.
For instance, they might choose to give 10 per cent to charity, invest 20 per cent in a savings account, put 30 per cent aside for that ‘dream toy’ they desperately want and spend the other 40 per cent on clothes.
7. Don’t be tempted to come to the rescue
We’ve all been there. You’re standing at the checkout and your child spies those tempting treats and starts begging, ‘Can I have one? Pleeeeaaasssse!’
Sometimes we feel it’s easier to give in to their demands just to keep the peace. But you’re actually creating a rod for your own back and lots of entitlement issues in the long run.
Would your boss give you a pay rise if you whined a lot?
Successful money management is about making choices and learning the consequences of those choices, so you make more good ones, more frequently.
8. Help them keep a financial journal.
Make it a habit to write down the details of how much they earn, how much they save and how much they spend in a financial journal of their own.
Too many people fall into bad spending habits by completely losing track of where their money goes on a daily basis. This spells disaster and encourages frivolous purchases.
9. Enforce consistent savings habits.
I cannot stress this enough – open a bank account in your child’s name and take them into the branch every time they earn money, apportioning some to their savings account!
10. Give them more responsibility.
Obviously this one applies more to older children. But it’s important for them to realise at a certain stage that life’s practicalities – like food, shelter and clothing, won’t always be paid for by mum and dad.
Allowing them to make some of these decisions for themselves will give them the opportunity to work out what they value too. With clothes for example, they’ll soon learn that designer brands can be a costly fad to buy into (literally).
11. Promote good financial decisions.
Encourage them to have the drive and ambition to earn money and take responsibility for their income. Rather than having to drag them to the bank each week, you want them to feel compelled to save before spending, not the other way around.
12. Help them review and adjust their budget.
As your child gets older, make them a lot more accountable for their own personal budget and be there to help them review their money management every few months. This will demonstrate how to remain on a financially stable path through life, by staying on top of their finances at all times.
13. Wean them off the bank of mum and dad!
Let’s face it; we all worry constantly about whether our child’s needs are being adequately met. As such, we tend to over indulge when it comes to the stuff they want (because clever marketing campaigns convince them they must have it!).
Too many people place too much emphasis on material things, when what we could probably all do with more of is a big bear hug from the ones we love! Wean your child off your wallet and shower them with affection rather than stuff. I’m pretty sure they won’t begrudge you for it!