By Jo & Carl Violetta
We all strive to help our kids set healthy habits. Managing money is a helpful skill they can benefit from for the rest of their lives. Kids who develop good money management skills from an early age are more likely to be ready to face financial challenges as adults.
As parents we can all play an important role in helping our children understand money and set good habits when it comes to finances.
It’s important to understand what level they’re at and find teachable moments, or set realistic goals that your children can relate to.
As a husband and wife Finance and Mortgage Broking team we have the same conversations about money over our kitchen table as anyone else.
There’s a pretty large age gap between our two kids. Our youngest, Marcus is almost six years old, our eldest Eva is turning 19 this year.
They each need different approaches to helping them learn about money.
Here’s three key messages worth sharing with kids about money for each stage they are at:-
Pre-School
Numbers are fun
A good understanding of numbers will help kids make smart decisions on how to save, invest and spend their money in the future.
Toddlers and pre-schoolers can be introduced to numbers through:
- Playing games like hopscotch
- Singing songs with numbers and counting
- Counting ingredients when helping to cook
- Counting objects around the house such as toys or shoes and sorting them into categories
Healthy money behaviour is normal
Parents role-modelling healthy money behaviour positively influences children’s beliefs and values around money.
The way parents talk about money, their spending habits, and general approach to finances are noticed by children, even when they’re very young.
Pocket Money
Giving kids pocket money at around four to five years of age helps them learn about the value of money, the relative price of things, and saving. Saving up for something teaches kids that sometimes we need to wait for the things we want.
Money boxes help pre-schoolers learn how to count money, and they can physically see their savings grow.
Primary School
Maths can be enjoyable
Make maths fun by playing board games involving calculations like Monopoly.
Teach children about numbers used in sports, such as scores, batting averages and percentages of wins.
Read books with mathematical themes; our family’s favourite is Benny’s Pennies by Pat Brisson
Need vs. Wants
Understanding needs versus wants is key to being able to live within your means.
Explain to kids that needs are things you need to live, such as food and water, while a want is something you would like to have, but it’s not essential for survival, such as chocolate and the latest Super Mario game.
Saving is a great idea
Encourage kids to set savings goals. This gives them an opportunity to practice making financial decisions; they get to decide how much of their pocket money they save and spend.
High School
Cash is king
Encourage teens to use cash to make purchases rather than pay with a key-card. Using cash is a tactile and visual experience. When teens pay with plastic they’re using ‘invisible money’ which is an abstract concept that doesn’t feel as real as cash.
Budgeting
Provide teens with an opportunity to learn how to budget. We suggest increasing your teen’s pocket money and increasing the expenses they are responsible for. This helps them build on the money management skills they developed in primary school.
Spotting a good deal
Strong maths skills will better equip teens to make sound financial decisions as adults. For example, if they understand percentages they can tell if an item on sale is offering a good saving.
Encourage your teen to explore how interest works. Discuss the pros and cons of borrowing money to purchase a car, including how paying interest will affect their monthly repayments, and factoring repayments into their budget to ensure they’re manageable.
Teaching kids how to be smart with their money doesn’t need to be complicated; it just requires consistency and some conscious planning. Talk to your children about money, role-model healthy money behaviour, give them plenty of opportunities to practice their money management skills, and they’ll be well on their way to becoming financially savvy adults.
Jo and Carl Violeta are self-confessed numbers nerds, parents of two, and co-founders of the award-winning business, Violeta Finance. They’re a husband and wife team who are passionate about empowering their community with financial education, love the odd glass of wine, and get a kick out of helping families achieve their homeownership and financial dreams.