Home Wealth Personal Finance When and how to start teaching your kids about finance

When and how to start teaching your kids about finance

Show them the value of money, early and often.

Co-host, Your Money Live

(iStock.com/123ducu)

Money affects everything in our lives, whether we like it or not.

Most parents know that teaching smart financial habits to our children will have a hugely beneficial impact on their life. But most of us don’t know how to go about it.

The answer may lie in starting earlier than you might think – when your child is as young as three years old.

From today, start talking about money around your kids and don’t stop. Loop them into your honest thought processes at the kitchen table, at the shops or wherever you are making money decisions.

What kid doesn’t love to scan stuff at the supermarket self-serve checkout? I get my four-year-old to scan the groceries and comment on how high or low prices are.

As you leave the shops, tell them about the shoes you just saw and really want, but don’t really need. The ones that, being sensible, you decided against buying.

These kinds of easy, honest conversations can be hugely beneficial for a child.

The key is to include conversations about finance in basic ways like this, all the time.

No matter how old they are, the exposure and realism of the conversation will seep in and help them prepare for a successful financial life in the future.

The invisible money generation

Is it harder to teach kids lessons about money when that money is invisible?

Absolutely it is. And with our world-leading take up of cashless payments, it’s probably harder for Aussie kids than kids anywhere else in the world.

We all use ‘tap n go’ and online banking tools now. The problem is that watching adults tap for purchases makes it appear like money is an unlimited resource.

My top tip: bring cash back into your life in 2019 for daily purchases.

I’ve recently started carrying around a fold-up, velcro Batman wallet in my handbag. It’s my son’s.

When we pay for purchases, he takes out (my) money, he holds it, he watches it leave his hands and can see the dwindling balance in the wallet.

It’s a much more powerful experience. He’s surprised me more than once, opting to forgo a drink or treat at the shops instead of part with his shiny gold.

It’s called the a ‘pain of paying’, and it works for adults too.

Start paying with cash again and watch how much you save. It’s something my Your Money Live co-host Chris Kohler found out first-hand recently.

Rethink the piggy bank

Piggy banks are a symbol of healthy personal finances. But are they still a good idea?

Yes, but not the ones we had as kids.

The best idea around is to find three jars or containers for each child and mark them: ‘spend’, ‘save’ and ‘share’.

When the kids receive money from chores, work or gifts, put some money in each. Have a conversation at the very beginning about the split.

The first will allow them to buy those everyday items that can be part of a fun and healthy childhood.

The second will allow them to start to build a balance for things on their wish-list.

The third teaches them that money can be a powerful tool in helping other people.

If you really want to keep life online where you think it belongs, there are some great online apps emerging that allow kids to do roughly the same thing in a user-friendly and modern way that links directly to a debit card/account.

The founder of one such app, Spriggy, recently shared his story on Your Money Live and we thought it was a great initiative.

Turning a present into a lesson

Kids these days mostly live for the here and now. They have instant access to information and most of their recreational needs.

But when it comes to their finances later in life, this is not going to be a healthy habit.

If you focus on teaching them one thing in 2019, make it delayed gratification.

Make them save up for the expensive toy they keep asking for. It will teach them that anticipation is fun and rewarding. It’s a lesson that will help them curb the impulse buying, or credit card bingeing, later in life that gets people into big money trouble.

Plus, research – such as the famous ‘marshmallow experiment’ at Stanford University in the 1960s – demonstrates kids with a tendency towards delayed gratification by the age of 5 are more likely to succeed later in life.

Just as many adults come to find their work life rewarding, kids will also love the feeling of working for their money.

Teach them the value of money early and often. Make it fun and practical.

I’m certainly giving it a good crack with my kids. And hopefully, setting them up with skills that will help them for life.

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