They say children learn what they live. Among the many lessons we can teach our children, there are few more valuable than providing them with a sound understanding of the concepts of money, budgeting and saving.
In these modern times of EFTPOS, credit cards, direct credit and automatic payments, it’s becoming increasingly difficult to teach children good monetary habits. Other things have changed too. Rather than receiving a weekly amount of pocket-money, many children now exist on an as-needed supply from their parents, which can often seem limitless in demand, if not supply.
We as parents need to teach our children the value of money, and stress the benefits of saving and budgeting. It’s important that children are aware that a bottomless pit of money does not exist, and only certain things can be afforded each week. It’s also vital they realise that “needs” have to be met before “wants” and once the money has gone, it’s gone. Consider sitting down with your kids and explaining how much you earn, and what percentage of that money needs to be spent on rent/mortgage, bills and food before other “luxuries” can be afforded.
The ‘jar’ system
A jar system works well to demonstrate the concept of saving. Each time your child receives pocket-money, they divide it into three equal parts. One part is money for now, and can be spent straight away. The other parts go into “savings jars”, one with a specific purchase in mind, and the other for long-term savings. Running totals of dollar amounts and pictures of what the money will eventually be spent on are good ways of helping to reinforce the concept. You might even add money to the savings jars occasionally, explaining that “interest” can be earned by saving money.
When your child is old enough to open a bank account, do it! These days they can check the balance on the Internet, but make sure they have printed copies they can refer to as well, much like the old passbook system. In fact, many banks still provide passbooks for their younger customers.
At the supermarket, explain why certain brands are chosen in order to stretch the dollar further. When you withdraw money at the ATM, make sure you also show your kids the bank statement which confirms the withdrawal, and the decreased balance. If your child’s pocket-money runs out, resist giving them more – that will only teach them that money is available whenever they want it.
Use any opportunity you can to teach your children about the many aspects of money, finances, saving, spending and budgeting. Giving them a good basic knowledge of these concepts early in their lives will stand them in good stead for the days of financial independence which lie ahead of them.
The views or information given in this article are not necessarily the views of AMP or AMP Adviser Businesses. It provides general financial information and is not intended to provide financial advice. For personalised financial advice, we recommend you contact us.