Money doesn’t grow on trees

From the time they’re learning to crawl, parents begin teaching their children about right and wrong, personal safety, manners and morals.

Over time, children are taught about stranger-danger, healthy eating and personal accountability. Another important survival skill children will need in the future is how to take care of themselves financially.

It’s not just about spending

Children see their parents spend money, on one thing or another, most days. However, teaching children about important, less visible money skills such as earning, saving and investing will have a profound impact on their attitude to money in the future.

Giving children the skills to control their finances is not only beneficial to their financial wellbeing – it also contributes to the forming of their personality and unique attributes. The lessons on self-control, resourcefulness and sharing are all valuable in shaping a well-rounded, socially aware and responsible person.

Where to start

There are some simple things you can do to help your children get on the right track.

For young children in infants school

• Encourage your children to play ‘shop’ so they start to understand that goods cost money and some goods cost more money than others.
• Set a goal to save money for their next toy. Make sure it’s not too expensive – it’s important it’s something they can achieve in a realistic timeframe. Some schools have banking days so kids have the chance to bank money received from their relatives, for birthdays or Christmas, to earn interest.
• Consider giving them money to spend at the school canteen or cake stall so they can use their basic knowledge of coins and notes and the maths they’ve learnt at school in a practical way. Help them count the change.
• Teach them that sometimes they need to choose between two or more things they want to buy.
• Explain that money comes from working and that you need to go to work to earn money.
• Teach them that some people don’t have as much money as you or are less fortunate than you and let them help you choose a charity.

For children in primary school

• Encourage your children to earn their pocket money by doing age-appropriate chores around the house - and consider putting the money directly in a bank account to help create a savings routine. You don’t have to pay them for every chore they do. Some activities can be simply part of contributing to the running of the household. Or, you could give them a flat rate which includes all the communal activities they do plus some extra money if they go above and beyond. Put up a tally on the fridge so they can see how much they’re earning.
• Teach them about credit cards and that it’s not free money and has to be paid off each month otherwise you’ll be charged interest.
• Let them help you research for items online to show them how shopping around can save money.

For children in high school

• Show your child your household budget or explain the concept of the ‘three money buckets’:

1. Expenses – for items that need to be paid at least monthly such as groceries, mobile phone bill, public transport costs, petrol.
2. Short-term savings – for items that occur less regularly, quarterly or yearly such as car registration, school fees, birthday parties.
3. Long-term saving – for larger, special events or purchases such as a holiday or new car.

• Talk to them about the magic of compounding interest.
• Consider setting up an investment bond or trust in their name - for the purpose of buying a car or holiday when they finish their formal education. That way they can see the benefits of longer-term investing in managed funds or shares.
• Talk to them about the pros and cons of loans including personal and home loans and the importance of saving for a deposit for a home.
• If they have a part-time job help them check their payslip and the tax they’re paying. If they’re not yet paying tax explain that once you earn over a certain amount tax will automatically be taken out and you need to do a tax return.
• Talk to them about your superannuation savings and that it’s an important way to save for retirement, when you can no longer earn money.
• Talk to them about insurance – home and personal insurance.
• Explain inheritance and the importance of having a Will.

Keep engaging your children on money and keep talking to them about it as they grow. The lessons learned will stay with them for life.

More information to help you teach children about money is on the Financial Planning Association's money and life website