Knowing how to explain money to a child, teaching kids the value of money, budgeting and the all-important pocket money conversation are all challenges parents will face at some stage.
You don’t necessarily need to be specific with what you earn and spend, but money shouldn’t be a taboo subject and we shouldn’t shelter our kids from real-life money matters. By having open conversations with your family and helping your children to learn about and practice good money habits, you’re setting them up to make educated decisions for life.
Good habits can take weeks, months and even years to build. So there’s no better time than now to start talking to your kids about money.
1. Embrace their inquisitive nature
Kids are inquisitive by nature. They’re eager to learn and are constantly asking questions about why and how things work. You don’t need to plan a day-long lesson on the history of the RBA! Simply start by asking them questions like ‘what do you know about money?’ and ‘do you know where money comes from?’
As they get older, these questions will evolve and you may end up spending a few hours building a budget, but start with a few simple questions and work your way up.
2. Honesty is the best policy
As much as we want to shelter our kids from parts of life, they can really benefit from being aware of the fallout and payoffs of certain decisions. Avoid hiding financial hardships from your kids and share your regrets and learnings with them.
For example, you may have bought a car when you were younger. At the time you could afford it and liked having it, but you didn’t really need it to be that big or expensive. If you could go back, you would probably buy a smaller, more efficient and less expensive car and used the other money to go towards your home deposit. So share these learnings with them, and rather than just telling them not to buy a big, expensive car, help them weigh up the pros and cons, and how that money could be spread further.
3. Family goals
Setting goals as a family is a great bonding exercise, helping you to understand what is most important to each person, as well as a collective. It’s also a great lesson for kids in setting goals, making an action plan, budgeting, working towards something and delayed gratification.
Take the time as a family to sit down, and using our Goals Worksheet, set some achievable objectives. Set smaller milestones and remember to celebrate the wins with the kids along the way.
4. Wants, needs, and making sacrifices
As we set goals and decide what we’re going to work towards, it’s the perfect time to clarify the difference between what we need, what we want, and what we might have to sacrifice in order to achieve the most important goals.
The goals worksheet above will help with this, but as an activity, get the kids to write down a list of all the things they want, say for the next 12 months. You might have to remind them to include activities like going bowling or to the movies, playing sports, or a family holiday (not just a new iPad!). Go through and pick out the most important ones, and discuss what they would be willing to give up for the things they want the most.
5. Let the tablet do the talking
Kids are all over how to work phones and tablets, so why not use an app to help them learn about money!? There are a number of apps like RoosterMoney Pocket Money App and Spriggy Pocket Money designed specifically to help parents teach their kids about money. MoneyBrilliant is a little more advanced app, with the free version being perfect for teenagers. We recommend you use the app yourself, practice what you preach, and role model how you use the power of information and technology to make informed decisions about the money.
For younger kids especially, understanding the value of money can be difficult as tangible cash is now a rarity. By using an app, you remove the cloak of invisibility around money and the concept of money becomes more realistic.
6. Let them make mistakes
As hard as it is to watch our kids make mistakes and misjudgements, the lessons they learn from these mistakes are invaluable. Giving them freedom helps them to learn responsibility. They learn how to review a decision and identify where they went wrong, and will know better next time.
It also includes games, incentives and activities to try with your kids along the way. To download the guide, click here.
Many of us have been impacted financially by the Coronavirus pandemic. No matter your situation now is the time to highlight some important money lessons, including:
‘Never waste a crisis’, there are many valuable lessons we can all learn about our lives during this pandemic; make sure you are sharing those openly with your whole family.
If you would like to discuss your financial situation, we are happy to assist. Contact us today.
What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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