Kids cost a fortune! Sometimes it feels like you should padlock the fridge and blindfold them in shopping malls, not to mention getting your salary paid in supermarket vouchers. 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 will learn many of their valuable life lessons by observing their parents, therefore 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, which is why even a small shift in interest rates can make a big impact. It is generally accepted that factors such as house prices and an over reliance on credit cards has a lot to do with our debt problems and the next generation will certainly face the same if not greater financial challenges.
So, 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.
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, such as 6 or 7, they will start to build an awareness of how much things cost. Pay them regularly and punctually, to show that a wallet should not just appear on a whim or a whinge.
Talk to them
If your family is facing financial difficulties, sharing is caring. 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. Previous generations were raised knowing full well that ‘money doesn’t grow on trees’. Being open and talking with your children sets them up to be open and honest in their future lives as well.
Educate your children on how much things cost. Play a game to try and guess how much household items cost and even make it fun 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.
If your children watch a lot of television, excessive advertising can be wiring them in a way that they will only want the latest and greatest toys, labels and gadgets. Send them outside instead. Fresh air is healthy and free of charge.
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.
Put them to work
Of course, this does not mean sending them off up a chimney to do cheap child labour, rather set them chores around the house, where they can learn that hard work can earn rewards. Do still allow them the occasional gratification of choosing a new toy or experience, as the excitement will encourage them in the future. Set aside a portion of the money, for example a third, to be put away for a rainy day. Naturally, make a really big fuss of them when they reach certain savings milestones.
Show them the red card
For older children, teach them the difference early between credit and debit cards. Be very clear when warning them about high interest rate traps. 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. 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.
Put the ‘free’ back in free time!
As a family, spending quality time together does not have to involve spending a small fortune, although the occasional splurge will always go down well. Have a brainstorming session about days out for under $10, such as new picnic spots by bicycle, or a games day with other families in the local park. This will reinforce the message that people are more important than possessions, and will hopefully distract us from those toys, such as mobile phones, which keep us from focusing on our loved ones.
Doing it tough
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, for example working out your average grocery bill and then trying 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!
Final words on building money habits
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 is vital to reinforce to your children that money is finite. Hopefully the only person complaining about the extra load in the future is the piggy bank!
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