Money’s three big lessons for kids
TEACHING children financial literacy is becoming increasingly important in a world of invisible money, easy credit, and the ability to buy almost anything with a quick tap on a smartphone.
Professionals say parents and grandparents should not rely on schools to teach good money habits.
Here are three vital financial lessons every child should learn.
1 SAVE BEFORE SPENDING
Rise High Financial Solutions director Marissa Schulze said the most important thing anyone could teach children was to save part of their pocket money or other income.
“I think that when kids are living at home and don’t have many expenses they should be saving about 70 per cent of what they earn,” she said.
Savings should always aim to be at least 20 per cent, Ms Schulze said.
2 UNDERSTAND VALUE BEFORE COST
Children should be taught when shopping how much cheaper it could be to buy items in bulk or discounted. “Look for things that are on special,” Ms Schulze said, adding that learning patience and waiting for discounts was a powerful lesson .
Wotherspoon Wealth director Simon Wotherspoon said the value of pocket money was taught when linked to effort. “You may wish to assign a price per chore within an overall limit,” he said.
3 WHERE MONEY COMES FROM
Many children rarely see cash, their parents tap cards at terminals, even cards for school lunches.
“Kids can think it’s a magic card you wave in front of a machine and buy anything you want,” Ms Schulze said. “They still need to understand it needs to be paid for with the money you have.”
Often any money that children do see pops out of an ATM.
Katie Costa teaches her children based on their personalities and ages, and starts paying pocket money at age five using $1 per year of age as a rule.
Youngest son Drew, 3, doesn’t receive pocket money but has a money box. Penelope, 5, receives her pocket money in cash while Hugo, 7, is learning about the invisibility of modern money and his income and spending is tallied on a whiteboard.
“They have jobs to do to get their money. It’s making sure they’re aware that money doesn’t grow on trees,” Mrs Costa said.
Mr Wotherspoon said children would tune into money messages when it was discussed at the dinner table. “Often, young grandchildren are given a small parcel of shares while they’re young and they see how their value grows over 10 years or more,” he said.