Timeline Photos Money doesn’t grow on trees, but we’re not always taught that as kids.
It’s critical kids learn positive money habits early in life, but in a consumer- focussed society, this can be difficult. It’s up to parents to give their kids a strong financial education.
1. Allocate pocket money between saving and spending.
Primary school is a great time to form this habit. We can teach some real valuable and sustained lessons at this age. Importantly, we can teach kids about allocating money between spending and saving. Primary school kids can set up a system so they take some of their earnings, ie pocket money, and put it away for planned future expenses and savings, and then learn to only spend what is left. This last part is a lifetime skill that will set them up for success with money for life.
2. Use constructive language when talking about money.
It’s never too early to start your kids on a positive money journey, but one key habit is to choose words carefully when talking about money. While preschoolers are at the point in life where they want everything they see that excites them: food, toys, that ride on a pony, we need to be measured in our response. Don’t just say no, or ‘no I can’t afford that’, change your language to be more focussed on what the child can do to earn money to pay for what they want. While we appreciate that’s nigh on impossible if they’re having a tantrum in the middle of a shopping centre, the messages need to be part of a continual process of education in the home before the argument starts.
3. Learn to automate your expenses.
By the time your child gets old enough to open a savings account, they need to be taught automation. If kids have graduated from a jar-based money box system, where they’ve allocated a ‘savings’, ‘spending’ and even a ‘giving’ jar, moving to an actual bank account shouldn’t be too
difficult. We believes kids will benefit from opening a savings account. By the time kids get to teens we can teach them to automate the ‘jars’ system (and transfer the idea to a bank account). So money that comes in is automatically sent to different bank accounts based on purpose and they only ever use the leftover part.
4. Money should be enjoyed so we learn the value of it
The key is to build the habit of putting some away as a priority, but then having some for fun. If money is only ever locked away it will build the wrong mindset once the constraints are taken away, i.e. the parental control. I think it is really important that kids have the freedom to spend their money, otherwise it is just numbers on a bank account.
5. Kids should be allowed to make money mistakes, as long as they learn from them.
It’s important to teach responsibility early. Two years ago, your kids might have spent every last dollar of their pocket money on Pokemon cards. Now they don’t even play with them. Challenge them to realise that they spent a lot of money on stuff they no longer need or want. I am also suggesting they consider looking after these and selling them. But they’re not quite entrepreneurial enough (yet)!
This is why you should be teaching money skills early, as small mistakes are easier to recover from than bigger ones as you get older. But it’s important for kids to be supported through these lessons.
The younger they are the more likely the mistakes are only going to be little, but it is important that they learn from the mistake. As they get older there is more likelihood for the mistake to be more significant. While I believe they need to make mistakes to learn - if there is an opportunity for a parent to help them make a big mistake, do it in a way that still allows the child to learn. Don’t step in and take over, but rather present a scenario for the child to consider, that shows the potential for the mistake and let them see it and adjust behaviour accordingly.
It is important for mistakes to be made however, as we gain the best lessons from mistakes. ... See more
