In a recent Radio Eastern Show, we outlined the 10 Money Tips to teach your kids before they turn 10.
In a rapidly changing world, teaching your children about managing money has never been more important. If kids develop good financial skills from an early age they'll be ready for the financial challenges of adulthood. Teaching children the basics such as how to budget, spend and save will establish good money habits for the rest of their life.
In a time of credit cards, internet banking and online shopping, children don't often see people buying products with physical money. These days kids see their parents swipe their cards at the register, and as a result, children don’t often realise that money is a limited resource.
When you next go shopping at the supermarket explain to your kids how each item has a different price, and how you can get a cheaper or more expensive version of the same product. This also presents an opportunity to discuss how you can shop around for the best price. You could get them to compare prices for you and pick the cheapest one out. If they pick out a particular brand that is more expensive, then explain the price difference to them.
Often the best way to teach kids to start managing money is to give them some themselves to manage. Better still to have their own money in the first place, its best they earn it through some household chores – i.e. putting out the bins, etc.
Teaching kids “delayed gratification” will help combat the "buy now, pay later" mentality that could lead them into bad habits later in life, causing a credit card debt later on in life. So, as much as you can, reinforce the idea that waiting pays off.
Often children will come to you with a mile long of new bits and pieces they want. In these situations, the best advice is to sit down together, make a wish list and discuss what’s important about each wish. Then help your child prioritise and rank the list, and then select the most important wish to purchase from there.
When you receive your next internet bill, this can be a great opportunity to explain to your children that the internet connection that allows you to watch your favourite online movies or online games costs money.
Involving your kids in discussions about your family budget is another effective way you can teach your children about money. This helps give them the big picture about costs and spending.
The next time your kids come up to you and say, ‘mum & dad, I really want to get this or that”. This itself presents a great opportunity to teach your kids the value of setting up savings goals.
Introduce your children to the power of compound interest. Search for a compound interest calculator online and show just how $20 can grow with interest over time, without having to necessarily add more money to grow the balance. Once the benefits of compound interest are understood, go through the process with your kids to set up a savings accounts or even purchase some shares.
Have your kids donate a portion of their allowance to charity is a good way to teach children that money can be used to help people, rather than just for buying things. Remind them also that it's not about how much you give - every little bit counts.
If you would like to hear the full presentation from our fortnightly Radio Show, please contact the office on 03 9873 4000 to obtain a copy.