Money Grows on trees, right?

Parent – “We can’t get that, it’s too expensive.”

Child – “Why don’t you just get more money out of the ATM?”

Surely this is where money comes from – you put a card in a slot and free money comes out of the hole in the wall. Many children realise money is an important part of our lives. They know we go to work to make money so we can buy what we need. But do they truly understand where it comes from and how to manage it? What can we do to help them understand the importance of money in our lives?

There are many strategies we can put in place to help our kids build an understanding of money. Below are a few simple suggestions that could help with this, however, you have the final say in how you teach your kids about the importance of money.

1. Teach value, not simply cost – Give your child a small amount of money to spend the next time you are at the shops. They can choose what to spend it on but they must not go over that amount. This will show your child the value of money. They cannot spend more than they have (let’s not get them thinking about credit cards at this age!).

2. Pocket money – This is a contentious issue as it raises questions such as: How much? How often? Should kids be completing chores to earn it? What should the pocket money be used for and what will you still pay for? If you have expectations of them in regard to their pocket money, let them make their own mistakes. If they spend it all on the first day of the week and have nothing left for later, too bad! Once they see what they are missing, they won’t let it happen the next week. Instead of giving the money directly to your child, another option is to put it into a piggy bank for them to achieve a set savings goal.

3. Model the behaviour you expect to see – Children learn through watching what we do. They mimic our behaviours and learn from our actions. Therefore, we can expect our kids to inherit our spending habits. How many times each week would you catch yourself saying you ‘need’ something? Do you really need that new gadget/pair of jeans/handbag? Or is it simply a ‘want’.

If kids learn from what they see us doing, think about the behaviour you can model. One simple solution is ‘save before you spend’. Most people in this world tend to spend money and then save whatever is left over (if any). These people are generally not successful savers. The most successful savers are those who are able to put a set amount aside each pay, and then have the remainder to spend. Show your children how this is done. Explain where the money comes from each pay cycle and what you choose to do with it. This leads to the next point…

4. Help them to understand you work for the money you spend – The money that comes out of the ATM is not free. You’ve worked hard to earn that money and it is finite. If kids can learn this concept, they can start to understand why we are careful with where and how we spend our money.

5. Open a savings/investment account – You can open a bank account or investment in your child’s name at any time. Once they are old enough to understand the statements, sit with them and show them how it is growing. At this time, they can start to be involved with how that money is being invested and what it will be used for.

There are so many options for us to spend our money on these days – whether we’re out at the shops, sitting at home on our computer, or simply browsing websites on our smart phones. We need to make a conscious decision to teach our kids about money, and demonstrate to them the importance of managing our funds. The ideas above are suggestions as to how we can achieve this.

However, it comes down to taking the time and showing kids what money can do (and its limitations) in real life situations.

“This document or website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making an investment decision. Charter Financial Planning Limited and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this document except for liability under statute which cannot be excluded.”

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