Teaching our children about money can be a bit of a challenge. However, it can be one of the most important and beneficial lessons they'll learn and if done well, will become a lifelong skill they will thank you for one day! The trick is to make it easy and (a little fun!).
Our team at Peard Finance
look at some tips to get them started early.
1. Let them see how much things actually cost
Next time you receive some household bills, take them through some and explain them by comparing to actual, real-world outcomes. For example, show them the cost of your electricity bill and teach them that every time they switch on a light or the television, it costs money to keep it running.
If you're children are younger, you may also have to teach them that every time you go to work, it is to help pay for these bills. This will help them understand the value of time and money. It's also beneficial to break down how many hours you have had to work in order to pay for such things.
If you children are a bit older, you can begin to include things such as your mortgage payments, weekly grocery spending and petrol, on top of normal household bills. This helps teach them that everything has a cost.
Another way to help explain the value of things is to include the kids in the discussion if you are planning on spending money on a big purchase or a holiday. Show them how much the overall cost will be and explain to them how long it is going to take to save up for it. This is also a great introduction into budgeting and saving money and will give them an insights into financial goal setting.
Once they begin to understand this, relate this idea to their own spending. For example, if they really want a new Play Station or XBox game, tell them how much the game is and explain how much they will need to put aside out of their pocket money each week to pay for it. If they want the game sooner, they will need to make a greater sacrifice by putting more money aside. This may mean they won't be able to afford something else they want.
2. Get them working
Not all kids will be old enough to go out and get a job at the local fast food store or paper route (but if they are, then great!), so give them a job-like chore to do around the house instead. Draw up a jobs sheet with each job earning a certain amount of money. Assign some values to common household chores that are age-appropriate for you child. For example, you could start with cleaning their room at $1, or helping weed the garden at $2.
It's a great idea to wait until paying the amount owed until the end of the week. This helps to teach them about how the normal pay cycle works, and that oftentimes you will not receive money as soon as the job is complete.
Your kids will soon work out that the more work they do, the more they earn.
3. Help them manage their ‘pay cheque'
Allow them to make purchases with their earnings but assist them with creating a savings plan. They may spend half, save half or whatever you see fit. You may even opt to match their savings to encourage them to save more.
4. Start a savings account
Introduce the idea of a savings account to you children after a few weeks of "working". Most bank's children's savings accounts allow you to deposit from as little as $25 and offer great interest rates, which - depending on their age - you may want to explain to them.
With all these tools under their belt, your children will be able to build good money habits sooner, which they can take with them through life!