Nowadays, kids aren’t cheap! From keeping them clothed to stocking the fridge, all of these costs add up fast. But as much as raising a family is not cheap, we need to be passing on positive messages about money management to children as early as possible. This will set the benchmark for their money habits as they grow up.
Your offspring learn many of their valuable life lessons by observing their parents. If money burns a hole in your pocket, you could be setting your family up for problems further on, such as spiralling debt and other negative money habits.
Nowadays, the average Australian family has some of the highest debt levels in the developed world. It is generally accepted that factors such as house prices and an over-reliance on credit cards have a lot to do with our debt problems and the next generation will certainly face the same if not greater financial challenges.
What are the key things we can do to ensure that our children learn good money habits early on? Here are some tips to help you raise savings-smart children.
Give Kids an Allowance
It sounds counter-intuitive that you have to spend money in order to save money, but by giving them an allowance or pocket money from an early age, they will start to build money skills. When kids aren’t exposed to money from a young age (like 6 – 8), they’ll struggle to understand these concepts later in life.
Giving kids an allowance helps them understand:
- How much things cost
- The value of hard work
- Savings basics
Pay kids an allowance for helping around the house on a regular basis. It doesn’t have to be much, especially for young children. It still has a big impact on kids’ money habits.
Talk About Money
You may think you are protecting your children by shielding them from money troubles, but as a family, you need to be an open book when it comes to introducing cutbacks at home. Being open and talking with your children sets them up to be open and honest in their future lives as well.
Kids are more resilient and understanding than we often give them credit for. While you might not need to go too in-depth about debts, loans, and so on, having these conversations early is a must. Share your financial frustrations with them
Make Money Fun with Games
Making sure your kids have smart money habits doesn’t have to be boring. Educate your children on how much things cost with some fun games.
For example, play a game by guessing how much household items cost. Make it even more exciting by sticking on colourful labels. Likewise, discourage them from wanting cheap plastic toys from dollar stores which break after an hour’s play. Explain about the financial, environmental and quality costs of their purchases in a way they understand.
Teach Marketing Basics
If your children watch a lot of television, excessive advertising can be wiring them in a way that makes them only want the latest and greatest toys, labels, and gadgets. While there’s nothing wrong with enjoying TV and exploring the internet, it’s easy for kids to fall for marketing tactics.
Lots of businesses make their money by preying on younger kids. To combat this, teach them the basics of marketing. Share how ads are used to encourage people to buy more than they need. By sharing these facts and using real-world examples, you encourage your kids to think realistically about the things they want.
Lead By a Good Example
If you struggle to curb your own spending, be aware of the messages you are sending your children. Adults who are overly extravagant with money are unlikely to raise shrewd savers. Take responsibility for your own money habits and try to resist those impulse purchases.
While it can be difficult at first, especially if you’re new to making smart money decisions, try to teach your kids the fundamentals. A good starting point is to make sure your kids understand the following:
- Budgeting: Create a simple budget for your household and include your kids in this process. The more exposure they have to budget basics, the better equipped they’ll be in their own lives.
- Debt and credit: While younger kids might not understand the more complex concepts of debit and credit, they can understand the basics of borrowing and needing to pay the money back that you owe. If you take out any loans, talk to your kids about what this means long-term.
- Saving: Finally, ensure your kids understand the importance of saving and building an emergency fund for the future. You can even help them start their own savings account and celebrate big milestones.
Educate About Banking and Card Use
For older kids, take some time to show them the ins and outs of banking and using a card vs. cash. Many kids believe that these “magic” cards are just unlimited money, but as adults we know that’s far from the truth!
For older children, teach them the difference early between credit and debit cards. Be very clear when warning them about high-interest rate traps. To put things in terms they understand, use toy money to role-play spending scenarios on shopping trips.
Encourage Weekend Jobs
Many adults can relate to having the worst job in the world as a teenager, whether it be scrubbing kebab grease or washing cars in winter. This is an amazing learning experience, plus it’s a way to earn a bit of side money.
Having a part-time job is a great way to teach them to earn, save and comprehend the real value of money. It also makes for the foundation of a strong work ethic and amusing dinner party anecdotes as they get older. Weekend jobs might seem minor, but they make all the difference.
Change Their Perspective
If you already have tightened your belt since having children, take it one step further. There are many families in Australia who live below the poverty line. Teach your children a valuable lesson by putting yourselves in their shoes for a week.
One idea is to work out your average grocery bill and then try to live on half the amount. Take the children food shopping to look at the most cost-effective ways to cook a healthy meal—they may even discover a love for lentils! By going the extra distance, you show kids what it really means to mind their own money.
Strong Money Habits Last a Lifetime
It is estimated that children as young as three years old can understand the basic concepts of saving and spending. By the age of seven, many lifelong money habits have already been imprinted into their minds.
We are all responsible for our own financial choices in life, and it’s vital to reinforce to your children that money is finite.
For expert budgeting advice and debt help, we’re here to help. We have over 15 years of experience in helping people with our debt solutions. We’re here to help you gain control of your finances and your future. Speak with us today on 1300 368 322, chat with us live now or fill in the contact form below to arrange a callback.