There is no one size fits all approach when it comes to teaching our children about money. The strategies we use to teach our children need to be age appropriate and very, very relevant to the issues they face in everyday life. The purpose of this series of articles is to pass on practical skills and activities that will assist parents to take a proactive role in equipping their children with the skills on how to manage money.
The Importance of Teaching Children About Money
No matter who or what our children grow up to be, earning, saving, and spending money will become an essential component of adult life. How our children manage their money as adults will directly impact on their marriage, their family, their health and self confidence.
I believe that when it comes to teaching our children about money that parents need to take a proactive role; it cannot be left to school, nor should it be left to chance. Spending experiences are found in the outside world, not in the classroom. If you leave it to chance your child’s friends, TV, and society in general will gladly step up to the plate to offer advice.
It is particularly important as parents that we take the opportunity while our children are young to set them on the right path, both through practical advice and proven principles. While proactive teaching should begin at school age, it is important to realise that even before our children develop numeracy skills and an awareness of what they would like – but don’t have – they are observing their parents’ every move. The way we as parents handle our money, the priority we give to it and the emotions we attach to it, are all absorbed by our children’s sponge-like minds. Do you manage your money well? Do you practise delayed gratification? Do you give generously? Your child’s education begins with your behaviour, attitudes and priorities towards money.
When to Start
School age is the time to start giving your child pocket money. Children need to have money to learn about money. It is, however, very important to remember that pocket money is your tool for teaching them money skills; it is not about giving your child the means for buying heaps of stuff they don’t need… they don’t need a lot! Personally, I believe that for a 5 year-old, $2 per week is sufficient for teaching the principles of giving, saving, delayed gratification and spending.
Sharing Income With The Needy
Children should be encouraged to share 10% of their income with the needy and disadvantaged, and again they should also be taught why. This year our daughter Hannah is using her 10% to put together her own shoe-box full of toys etc for Operation Christmas Child. We have told Hannah that we will match whatever she contributes. Every time she has saved a few dollars, we will take her to the Reject Shop to buy stickers, lollies, pencils etc to put in her box. It is a real joy to see her so excited about giving; no doubt it will be a wonderfully proud day for her when she walks her own shoe-box to the front of church. From an early age she will have a powerfully positive emotion attached to giving and in turn learn a lesson on managing money.
Teaching Children About Savings
Ten percent should be put aside in a money-box as savings, and once the money box is filled it should be taken to the local bank and used to open a children’s account. It is essential that the child be part of this process. A trip to the bank to deposit their money should be an exciting event. They should be allowed to carry the money-box and to hand it over to the teller. All of the major banks have special kids’ clubs that encourage saving through special newsletters, pencils, rulers etc – all with blatant advertising of course – but for now it serves a purpose.
Teaching Children About Spending
The remaining 80% is for spending. While $1.60 doesn’t go a long way, try to find a healthy balance between allowing your child to spend immediately and encouraging them to save money for a goal. Help your child identify an item that they would like to buy and then sit down and draw up a savings chart with them. Right now Hannah is saving for a yo-yo; this will take her about 6 weeks. These 6 weeks will carry with them some very important lessons in delayed gratification. It may well be that after 6 weeks the urge to buy a yo-yo has gone, but if not, the 6 weeks of anticipation will ensure the joy of actually making the purchase is much greater. Will she value the yo-yo that much more if she has had to save for it rather than having it given to her the moment she expressed an interest? Absolutely – yes! Will she have a positive attitude towards saving? Without a doubt! Both these are valuable lessons in combating the ‘buy now pay later’ barrage that our children will be exposed to in teenage life.
Being a Proactive Parent
Don’t leave your child’s financial education to chance. Be proactive! Start the lessons at school age, make it fun, make it special and always take time to explain the principles behind the actions. It’s with no doubt that your children will learn healthy habits towards spending, saving and giving.