Money matters: teaching your kids how to be smart about money

Money matters: teaching your kids how to be smart about money at a young age

Coles Financial Services 2nd Feb 2016 in Financial services

Kids can have a hard time understanding money. They believe in Santa, the Tooth Fairy, and the Easter Bunny; so why shouldn't they think money grows on trees?

But as parents, it's important to teach kids how to value money. The earlier they see that those cards in your wallet aren’t toys, the better they will be at making financial decisions. Teaching them now will mean they will be responsible in the future.

To kick start this education and get your kids on track for a money-wise future, try these simple, everyday techniques.

1. Make money visible

Thanks to online shopping and credit cards, money today is hardly ever visible. This can make it difficult for kids to recognise the real cost of everyday things. One way around this is to talk to your kids about money. Make it real. Explain the differences in notes and coins and allow your child to make a small purchase. The more familiar they are with money, the more they’ll understand its value.

2. Use real life examples

Money makes sense in context. Use your everyday experiences to talk about money. If an electricity bill arrives, explain it in terms of your daily pay. Build a connection between time, work and money. Do the same at the ATM. If you take out $100, tell your child how you earned the money by working. If you can teach this at the ATM, your child will be well on their way to becoming a financially savvy little adult.

3. Involve kids in shopping decisions

Kids love to believe they're in charge. Make them feel like the boss by involving them in your shopping choices. When you're at the supermarket, talk about prices and what things cost. Ask them to find the least expensive cereal, or the milk that’s on sale. When they see that prices vary, they’ll start to appreciate that not everything has equal worth. Over time, they might even become your personal bargain hunter!

4. Explain needs versus wants

"But I want it!" No doubt you've heard this before. Think of ways to explain the difference between needs and wants. Understanding how to differentiate between the two will help them control shopping splurges in the future.

5. Research deals

When you are about to make a big purchase, involve your child in the research process. Look at ads online and talk about the pros and cons of each deal. Let your child see that you should not rush into buying anything - particularly when there's a hefty price tag. For older kids, this is also a good opportunity to discuss shopping only on secure sites with a credit card.

6. Encourage goal setting

To really get your children to understand the value of money, get them to set a small goal. This could be a $10 teddy bear or a new set of colouring pencils. It has to be feasible (no ponies) and set within an appropriate timeframe. Once the goal is set, decide on a pocket money arrangement. Explain that if they can save their pocket money each week, they will reach their goal. And hopefully, that goal will be the first of many!

Tags: money tips family kids