In her article this month VICTORIA COSTER, the CEO of Credit FIX Solutions and Credit FIX Lawyers tackles the issue of teaching children about money and how to best manage it. Victoria shares simple ideas that any parent can use to ensure their kids develop money-savvy habits and start a savings plan early in life.
Kids are expensive, we know that, however when growing up I was never taught the concept of saving or money, and in turn I struggled to learn about money as a young adult.
So, for me, finding the time to teach my son about the value of money is especially important.
Schools are fantastic for education and learning, but our children aren’t learning about budgets or interest rates in the classroom.
Kids learn about money from us.
In my opinion, parents should teach their children about money as often and as much as possible. To start learning about money, kids firstly need to know how to save.
How do I teach my child how to save?
Start by organising a family meeting to discuss savings. Around the dinner table after dinner works for me.
Another suitable time may be on a quiet weekend. Just pick a time when everyone can sit for at least half an hour.
There are 3 steps to follow at this meeting to teach your child how to save:
- What are my needs and wants?
- Managing my money.
- Setting goals.
Step 1: What are my needs and wants?
For younger children, they may not understand needs and wants, but with simple pictures or words we can help them understand what a need and what a want is.
For example, having somewhere to live, having water and food and clothes are our basic needs. Most children can understand this and from an early age. Let’s face it, they can understand the difference between wanting a chocolate bar or needing it.
Having a family discussion around the dinner table can help children identify the difference between needs and wants.
TIP: Draw a simple chart on a piece of paper, with two columns, one titled ‘Needs’ and one titled ‘Wants’.
Get your child to be interactive and work together to complete these lists.
Step 2: Managing my money
By identifying our needs and wants, we can then show our kids how we manage our money.
We know how much money we have (wage) and then we pay our bills (needs), and then we have some left-over money (hopefully) that we can use for our wants.
This can also be written down on a piece of paper to help provide a visual aid to learning this step. We can keep our extra money every week and save it for things we want.
TIP: You can help your children to manage their money by getting them to do paid chores around the house and then saving this money towards things they want.
For example, my son gets $2 for doing the washing up and taking out the rubbish and $3 for organising laundry. I sign off on each chore and the list of what he earns goes on the fridge.
To help him manage his money, we sat down and worked out if he did these chores at least once a week, he would get $5 per week, and in 52 weeks he would have $260.
If he did these chores at least twice a week he would have $520 in a year, and so on.
Obviously, as he is only 10, he doesn’t have any needs to pay for, but you need to keep the topic age-related.
As children get to tween or teen years, maybe get them to start paying towards the phone bill or internet costs. This way they start to understand needs and managing bills, before spending their money on things they want.
Step 3: Setting goals
The third and final part to learning how to save is my favourite part of the process. Once your child understands needs and wants, and has established managing their money, you can start asking about and setting goals.
For example, my son likes to buy $2 apps for his iPhone. So basically he can complete some chores and pretty much get these straight away.
However, his long-term goal (because a year for a 10-year-old is pretty darned long) is to buy a PS4.
We looked at how many chores he would have to do over the year to work towards his goal and we are chipping away at this week by week.
Having short, medium and long-term goals is invaluable knowledge for our children.
Helping your child to develop goals and teaching them how to reach them can be one of the most rewarding parts of parenting and this is a vital skill set that you are teaching them.
TIP: Teaching your kids how to save will save them the grief of trying to grasp this concept once they are older.
With a constantly increasing population, the world is becoming faster and more competitive by the day.
Giving our children these building blocks regarding money, can help keep them stay one step ahead of the pack.
If you are looking for more information you can also find information and resources on ASIC’s MoneySmart website.
If you are not sure about budgeting it is best to seek financial advice from your trusted Financial Advisor, your Accountant or sometimes even your Finance Broker can help put things into perspective on how to budget and save as a family.
As grown ups we also need to keep our financials in order, so make sure that you check your free credit reports to make sure there is nothing appearing that shouldn’t be there.
If you need help with your credit report – we offer No Result No Fee credit repair services Australia wide via our law firm, Credit Fix Lawyers.
Should you have any questions on credit reports, Credit Fix Solutions can be contacted on 1300 43 65 69. Or send Victoria and email if you need her assistance with removing bad marks and improving your credit score.
General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.