We teach children manners, respect and many other important life lessons. But very few of us teach our children one of life’s most important skills – how to manage their money. When this discussion comes up with clients I ask them to first take a minute to think about and examine the attitudes to money that they have that may influence their children’s behaviour, whether that be younger children, teenagers or adult children.

For example…

• How is money spoken about in your household (positively or negatively)?
• Do you keep track of your money and budget and have you explained this to your children?
• Are you in control of your finances or are they in control of you?

There is no set age to start teaching your children about money and it can be a difficult to know the right moment to start having these types of conversations. But there are some moments where you may notice your child starts to become interested in money matters such as:

• When you are withdrawing funds from an ATM
• When they start to receive pocket money
• When they learn to count
• When they begin maths at school

And there are many ways you can start having this discussion to build financial literacy and develop good habits.

How to Teach Younger Children

How to Teach Older Children 

Needs and Wants

One way you can lay the groundwork for teaching them about budgeting is learning the difference between needs and wants. Each time you make a decision to buy (or not buy) something around them make it a teachable moment. A suggestion might be to talk through together why you do (or don’t) need the item or waiting 24 hours before they make the purchase seperate impulse the decision making process. If you’re choosing to forego a want, put a positive spin on it by talking about what you can do later on with the money you save.

Setting Goals

Setting goals with your children will not only teach them about good money management habits but also the value of working for money and is a valuable practice throughout life. In fact your financial advisor will still have discussions with you on your goals, albeit a more complex discussion.

So make the goals simple for younger children, and also achievable in a short time. As your children get older, their goals should become more challenging and take longer to attain. Remember to always work with your children to set goals that are achievable and not unrealistic. Be sure to recognise when the goals have been achieved. Writing down and tracking their progress will keep children inspired about achieving their goals. This should be displayed in an area where everyone can see the progress and provide positive feedback, such as on the fridge door.

How will the goals be achieved?

Setting goals with your children and relating them to money is a great way to teach rather than just giving out pocket money week by week.

• Creating household jobs will allow children to earn the money they need to achieve their savings goals.
• A good way to allow children to earn money is to draw up a list of jobs that they would not normally be asked to complete. By asking them to assist with chores around the house you will provide them with the opportunity to earn extra money.
• Agree on the task and how much you’ll pay your child for each job they complete and remember to set the standard of work that is acceptable. As children get older they may look for other ways to earn money outside the home.

Budgeting

Children benefit from being taught to budget, save and monitor their spending from an early age. Start them off with a simple budget so they become familiar with the concept. Here is an example of a simple budget to start your kids off. Budgeting is all about financial discipline and learning to live within your means.

Money In	Money Out
Earned $7.00	Saving goal $3.50
Gift $3.00	Spending (toy) $4.50
	Spending (snack) $2.00
Total $10.00	Total $10.00

3 Piggy Bank System

There is no shortage of well known budgeting systems for Australians and there is no “right” or “wrong” approach. A simple way to teach kids about budgeting is with the ‘three piggy bank’ rule.

One piggy bank is for savings – 45% of their money should go in there. Another piggy bank is for spending – a further 45% of their money should go in there. The final piggy bank is for sharing – 10% of their money should go in there.

Starting children on the journey of learning about money is a life lesson that will help them not only now but as they mature into young adults and beyond.

Daniel Nadal is a Senior Financial Advisor at Viridian Advisory.

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