Tips on raising money smart kids
These are things they won't learn in school...
Knowing how to manage money is a lifelong skill – one that will see our children through good and bad times. But it’s a skill that should be taught from an early age. Financially responsible adults don’t just emerge like butterflies at the age of 18, they need a little help to find their wings, so the earlier you help your child to understand money, the better.
As your kids get older, you may find that some schools do their bit to teach financial literacy, but it’s ultimately your guidance that’s needed.
Scott Eddington, APAC Managing Director of international money transfer company WorldRemit, has a few tips to help you teach your children to be money savvy as they grow into adults.
1. Let’s talk money
Many parents may not want to chat about family finances in front of their children, but to nurture a child who’ll be in good financial shape as an adult, it’s really worth starting the conversation early – without, of course, bringing up any real financial worries.
So, consider chatting with the kids from an early age about routine purchases like food, paying for education, transport and holidays. Discuss the difference between the things you need such as food, water and heating, and the things you want – toys, games, clothes, tech/apps etc. This will help with the more expensive ‘wants’ as they grow up, like the latest trainers, clothes and technology.
When they’re young, take them shopping, look at the price labels and pay for items with cash, rather than paying with a seemingly ‘magic’ credit or debit card. Cash is a tangible thing – once it’s used, it’s gone. Kids need to learn that.
2. Introduce them to money
As soon as your child can count is the time to introduce them to money. Show them notes and coins and teach them the value of each one. Best of all, play some money games with them – engaging games to help them understand the value of coins, how to count money and work out change.
You can play these games online or as board games. Monopoly is an old favourite that not only gets children handling money but also teaches them the basics of investment. You can also create your own homemade games. After all, what child doesn’t love setting up and playing shop? Play and learning really can go hand in hand.
Kids love playing ‘shop’ but as we all handle cash less these days, it’s a good idea to help them understand money even if they can’t see it.
3. Get them budgeting
Whether your children get gifts and pocket money from you or earn their own money with an after-school job later on, it’s worth introducing the idea of budgeting early. And make it fun!
Yes, budgeting really can be fun if you draw up a colourful chart for them to fill in. Two columns: ‘money in’ and ‘money out’.
For younger children, they can put their money in three different piggy banks or jars – money for spending, for sharing/gifting, and for saving.
By budgeting, your children will begin to take more personal responsibility for managing their money. The ‘Barefoot Investor’, Scott Pape’s book Barefoot Kids is a great way to introduce older kids to taking care of their money – saving for what they want, how to earn extra money by helping around the house plus stickers to keep them motivated and other kids’ stories to inspire them.
4. Start them saving early
It’s important to teach your children that however much money they may be given or earn – they don’t need to spend it all at once. It is far better to set some goals and save for the future!
So, help them open a savings account – a digital savings account may be best. After all, our children will be doing most of their banking online in the future. The earlier you get them managing their finances on a computer, tablet, or mobile phone, the better.
Once they have a savings account – you can look at the monthly statements with them – and explain how the account grows because of deposits and interests. Encourage your older children to put larger sums away for something they really want like a new bike or computer.
By saving your children will learn how rewarding self-discipline and goal setting can be.
A selection of piggy banks or ‘funds’ for different wants can help kids learn how to save from an early age.
5. Working for the things they want
When your child sets their heart on anything from a book to a bike, instead of instantly reaching for your credit card – encourage them to earn the money for themselves. No one wants work interfering with their children’s studies or play, but there are small jobs they can do to earn a little and pay for the things they want.
Young children can top up their piggy banks by doing household chores. Tweens (10 to 12 year old) can do babysitting, or gardening. And older teens can get part-time work in shops, supermarkets, restaurants, and holiday work in cafes or at attractions.
The benefit of this? To give them the responsibility and self-satisfaction of earning their own money and saving from a young age. In this way, they can really understand and begin to appreciate the value of money.
6. Spending, not overspending
Now comes the really fun part. Once your child has saved the right amount, they can go shopping and then spend within a budget. Of course, advise them not to overspend. But as long as they’re mature enough, it’s best to leave the purchase decisions to them. They really need to be in control of their own decisions when it comes to money.
If you help them become smart spenders, you’ll instill in them some valuable lessons about how personal choice relates to managing money.
