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Teaching your kids, the value of money is one of most value lessons you can teach your children. Start early by explaining to them where money comes from, how to budget and how to spend wisely and how to set saving goals.

You don’t need to be an expert to teach your kids, simply start a conversation about money when it comes up.

Children learn a lot about money management by watching how you use money. For example, if your child sees you setting a spending limit or shopping around for the best price, you help them learn about sticking to a budget.

Where money comes from

The first step is to teach your child where money comes from and how you earn it.

Explain to your child that money is limited, and you need to be careful about how much you spend. Explain that you must work to earn money, and you only get a certain amount of money each time you get paid. The money you earn must cover the essentials, like food, clothes and housing.

Where money goes

Once you have explained about where money come from, you can teach your kids about where money goes.

Explain to your child where money is kept, in a bank account and you can access your money through an ATM card. Tell them what the ATM card represents, which will help them understand the invisible money is real and not an unlimited resource. When you tap your ATM card this represents money been taken out of your bank account. When you tap to pay it uses money that you’ve made by working and saving. Each time you tap and pay, you have less money in your account.

Each time you spend money, for example while shopping, explain to your child how much you are spending showing them; different prices for similar items, how to compare prices in store, how to work out which items are better value and how to work out price differences and discounts.

Money decisions

It’s vital that you involve your children in money decisions, such as budgeting, saving, and spending.

Budgeting with your child will help your child to understand the money you have and how its spent. This will give your child a sense of the cost of living and importantly how long it takes to save money.

Involve your child in finding the best value deals. This will teach your child the importance of shopping around to find the best value for something they want.

Pocket money

Giving a child pocket money as young as 4 or 5 years, will help them to learn about the value of money and money management. When you give money to a child, they must make choices about spending or savings. And if they’re saving, they’ll learn about waiting for the things they want.

Pocket money also helps children to learn about consequences, for example the consequences of losing money or spending it unwisely. Ensure to let you child make mistakes as this is part of the learning process.

There are no strict rules, when you should start giving your child pocket money, we recommend start giving pocket money when they understand that they need money to buy things.

How much pocket money? Really depends on each individuals’ circumstances and what you think is reasonable for your child. Ensure your child understands how much they will get and how often.

You can base your decision about how much pocket money to give on:

  • What household chores you expect your child to do

  • What your family budget will allow

  • How old your child is – for example, you might give a five-year-old $5 per week and a seven-year-old $7 per week

  • What you expect pocket money to pay for – for example, if you expect it to cover things like transport, lunches and savings, you might need to give a little more.

There are no rights and wrongs when it comes to paying children for doing chores around the house.

Some families feel that everyone should help with chores just because everyone is a member of the family, not because they’re being paid. Also, linking children’s chores to pocket money might lead to bargaining about how much chores are worth.

On the other hand, some families feel that pocket money should be earned and not just given. And getting pocket money can motivate some children to do chores.

If you do decide to link pocket money to chores, it is a good idea for the chores to be regular – for example, tidying up the bedroom daily or weekly or putting out rubbish bins each week. This gets your child in the habit of working to earn money.

Saving money

Saving money is a vital skill you need to teach your child.

Using a piggy bank is great for younger children, as they can see the money they’re putting away and they can watch how it grows. Opening a savings account for your child, is great way to introduce them to banking, saving and interest.

Once you have taught your child about saving money, you need to teach your child to set goals and to prioritise their spending. When you child wants to impulse buy, ensure to remind them about the goal they were saving for, and work out with them how long they need to wait until they reach their savings goal, if they decide to spend today.

Learning activities about money

Children (aged 4-8)

Needs and wants

Help your child to understand needs vs wants to identify what they need and what they want. This doesn’t mean holding them back from what they want but helps raise awareness. Prioritise their ‘wants’ on a list. What do they want the most?

We recommend checking out Moneysmart, there are valuable online activities you can complete with your children needs and wants activity.

Set a Goal

Have your child set a goal, such as to buy a toy. Make sure it’s not so pricey that they won’t be able to afford it for months. Every time your child adds money to the savings jar, help her count up how much she has, talk with her about how much she needs to reach her goal, and when she will reach it.

Tweens (aged 9-12)

Include your child in some financial decisions

For instance, explain, “The reason I chose the generic orange juice rather than the brand name is that it costs 50 cents less and tastes the same to me,” Or talk about deals, such as buying everyday staples like paper towels in bulk to get a cheaper per-item price.

Organise birthday party

Organising their own birthday party, will help them to decide between needs and wants, create a simple budget, and learn about making wise financial decisions. The Moneysmart online activity party time is a great resource, it’s visual, fun and they learn at the same time.

Teenagers

Work for it

Encourage your teenager to get a part-time job. There’s so much to be learnt from a part-time job aside from money. Building connections, learning responsibility, customer service skills and manners are important steppingstones to adulthood.

Saving, Budgeting and Spending

It vital to get your teenager to establish a budget and savings plan. The Moneysmart budgeting online tool will help your teenager work through three case studies, which presents different attitudes towards money management and enables students to identify financial strengths and weaknesses.

Summing up

Just as important as the lessons you teach your kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.

Instead, make sure you model the behaviours around money that you want your children to adopt. If you want your children to develop good spending and saving habits, then they need to see you making smart spending and saving habits.

If you put in the effort and continue to communicate a clear message about money, you will instill good habits that will serve your children well in life.

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Important information – Oracle Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.
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