Raising financially literate kids

Set your kids up for financial success by teaching them about money and taking care of your own financial wellbeing.

It can be challenging to help children understand the concepts of spending and saving when they watch you ‘tap’ and ‘swipe’ instead of handing over physical money.

Research from the Financial Planning Association (FPA) [1] reveals that 68% of Australian parents are reluctant to speak to their kids about money, or they don’t know where to start. But the report also revealed that children whose parents talk to them about money are more curious, confident and financially literate than their parents were at their age. And parents who receive financial advice are much more likely to feel comfortable talking to their kids about money.

That’s why it’s crucial than to consciously teach your children about money: how to spend it and how to save it. Here’s five ways to do it.

1. Help them budget and save

Many children believe parents have an endless supply of money – which is why it’s so important to talk to kids about money from an early age. You can start by discussing your own household budget and explaining how you manage costs like weekly grocery shopping and phone bills. If there’s something your child wants, like a new soccer ball or item of clothing, work out a budget so they can save up and buy it. Then reward them by taking them shopping.

2. Give them pocket money

Pocket money is one of the simplest and most powerful ways to teach children the value of cash – which is why it should be earned rather than given freely. Whether it’s payment for completing chores or a reward for behaving well, children will understand very quickly that money has value. You can also separate their pocket money into portions for spending and saving, so they’ll learn how to put money aside for the future.

3. Set up a bank account

By setting up a bank account for your child, you can teach them the basics of everyday banking. It’s worth discussing the statements with them when they arrive – not only so you can explain what each part means, but also so you can check their progress towards their savings goals and praise them as they reach each milestone. You might even open a separate savings account to help making saving fun and easy.

4. Make money fun

Learning about money doesn’t have to be another chore: there are plenty of games you can use to teach kids financial literacy. From a young age, you can play-act spending situations with your kids, like pretending to ‘shop’ with their toys or using food items in the kitchen. As your children get older, these games can become more advanced. In fact, one of the best ways may be through playing Monopoly – which you can use to teach more complex concepts like rent and taxes.

5. Look after your own financial wellbeing and role model good money behaviour

The number one reason parents give for being unable to talk to their kids about money is not feeling good about their own financial situation. [1]

Children learn money habits from their parents – both good and bad – so it’s important to be a good money role model for your children by taking care of your own financial wellbeing and building your financial literacy and confidence.

Talk to us

Talking to a financial planner can help you understand your situation and make confident financial decisions (big or small) so you can get the most out of life.

Reference

[1] Financial Planning Association of Australia, Share the dream: research into raising the invisible money generation, August 2018.