Money leadership is one of the most important responsibilities we have as parents. We encourage all our clients to talk about money openly and freely as soon as possible with their children. From my experience, here are the top 5 ways we help teach our children about money...
They say old habits die hard, so the sooner you start talking to your children about money the sooner they can appreciate its value. From my experience the general thinking is, once a child becomes a teenager they are ready to start having money discussions. I believe this is too late.
I’m not saying you should sit your 2 year old down and start talking about the “rule of 72” or “pay yourself first”; rather introduce your child to the concept that money is valuable at the same time you do so with other concepts, such as right and wrong and cleaning up after themselves. It pays to appreciate the value of money early.
Once your child understands the value of money we encourage our clients to introduce the concept of work for reward. Note that this is different to bribing your child by offering money to get them to do something. I’m talking about good old fashioned hard work in addition to those things we all have to do like tidy up after ourselves and keep our room clean. We encourage our clients to draw up a job chart of age appropriate “big ticket” chores such as washing the car, cleaning the bathroom, vacuuming, doing the dishes and mowing the lawn. We tick jobs off when they’re done and money then exchanges hands. Trading sweat for money reinforces the principle that money is earned and you need to work hard if you want more of it. Money doesn’t grow on trees.
We have a rule at home that you can take up to half of the money out of your account to buy something you want – you have to leave the other half in there. This teaches kids that we don’t need to spend all the money we have saved on a single item. If we want to buy a new match box car for $5 we have to wait until we have saved $10 in our bank before we can take the money out. Rainy days happen for kids too!
Having a set amount of money to last over the holidays is a good way to show your kids how to spend money each day and make sure your money doesn’t run out. Helping your kids “average out” their pocket money introduces them to the concept of budgeting which will hold them in good stead for their adult lives.A budget each day keeps the holiday fun, yay!
Helping your teenager apply for and find a casual or part time job whilst they’re still at school introduces them to valuable responsibilities and skills around employment that will benefit them later in life. This also provides kids with some independence and builds self-confidence and time management skills.We ask our clients to work with their child to draw up a spending budget for their pay. Setting goals for big ticket purchases reinforces the rules we have introduced earlier in life, like budgeting and only emptying half the savings account. Independent teenagers – not as dangerous as it sounds!
The above are just a few ways to successfully introduce good money habits to your children. Our clients have told us the key to their success is to be consistent and just do it! We concur: action and execution is what most often separates success from failure.
Don't know where to start?
For more help and to take a fresh look at the way you're managing your own money, speak to your financial adviser at SFP. Or if you don't have an adviser yet, contact us on 02 9328 0876.
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.