These eight tips from a wealth advisor will ensure you teach your kids good money habits that will last a lifetime.
A child’s curiosity is a wonderful thing and it can give you the chance to explain the money world to them. Everyday situations are a great learning ground for teaching kids about money. Pick something simple and show them how it works. Here are just eight examples.
8 great everyday situations to use when teaching kids about money
Want to send your kids into the world with good money habits? Here are eight everyday situations that will give you the opportunity to do so.
1. Earning money
Explain to them that when you go off to work, you get paid. This money replenishes your bank account and that money gets used to pay for everything. Anything from essentials the family needs—such as food, clothing and your family home—to fun things such as holidays, toys and eating out.
2. Tapping your credit card or phone
When buying groceries, explain that when you are tapping your credit card (or phone), it talks to your bank account, where you keep your savings. You can also explain that each time you tap, money is going out of your bank account, using your savings, so you need to earn more money to replenish it.
3. Explaining bank accounts
Show your kids that bank accounts are a place for you to deposit and withdraw funds, make payments, transfer money to another person or institution, pay bills electronically, and more. Bank accounts enable you to spend without cash-on-hand and get direct deposits from employers or other institutions.
4. Checking prices
Show your kids different bags of rice (or a different product you commonly buy) on the supermarket shelf. Explain the different prices and how you go about choosing to buy the one with the best value or deal (if a brand has been discounted). Then, once you have paid, show them the receipt with the price listed on it. By showing them the receipt, you can demonstrate the transition from the shelf onto the docket (receipt) and explain that this amount will come out of your bank account.
5. Paying bills
Keep it simple and relevant. A good place to start might be your mobile phone or internet bill. Show them that to play games or for them to use their iPad, you need to pay for the internet. Show them a bill and then walk them through the steps for paying, similarly to the rice scenario.
6. Ordering school lunch
Kids in school may be able to buy their lunch or a special treat from the school tuckshop. Use this as a stepping stone. If you are giving them money, explain where that money came from. If your child’s school has an online ordering system, go onto the website and step through with them what you are doing to order their lunch.
It’s not too early to let kids know about scammers. Give an example of a phone call you might have received, explaining the risks with giving personal details over the phone or online. It’s easy to hold off explaining this so you don’t frighten your kids, but this is critical for kids today. Stranger danger in the world of finance: It needs to be told.
8. Lay-by and buy-now-pay-later options
Lay-by can be a great mechanism for saving towards a goal while buy-now-pay-later options are a slippery slope to debt. Encourage kids to understand the types of options available for spending money:
- Lay-by agreements let you buy a product and pay for it in two or more instalments before taking it home. It’s important for kids to understand what the written agreement covers and how you or the business you are buying from can cancel it.
- Buy-now-pay-later lenders (such as Afterpay, Klarna or Affirm) divide your total purchase amount into four bi-weekly payments. You can leave the store with your item or order it online after putting down just 25 per cent of the total price.
Teaching kids about money starts now
The sooner you get the kids involved, the better. They will make better choices as they begin to learn the value of money. They are likely to recognise money management needs planning and consideration.
As they transition through the teen years and realise they can earn money themselves and what they might be able to do with it, work with them, guiding them to develop and achieve specific money goals.
Edited extract from Stop Worrying About Money (Wiley, $29.95) by Jacqui Clarke.
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