One of the most important lessons our children can learn, is what money means and what it can do for them. Having a tap and go card makes it all too easy to avoid the planning part of accumulating an amount of money, so that a goal can be achieved. The goal might be as simple as saving to buy a bike or a device; to achieve the goal means planning to earn the needed money and to save until the amount required has been achieved.
Financial knowledge needs to begin when we are very young, so educating our children about money is an important step in their education. If you can teach your children the difference between needs and wants, how to budget and how to save, your children will have the rudiments needed to manage money in the future.
Young people benefit from knowing that money is earned as a result of hard work. This is one of the most important lessons your children can learn. Without this basic knowledge, as young adults they may well join the millions who have credit card debt and bills that are hard to manage; often precluding them from being able to demonstrate to a lender that they can manage a mortgage.
So, we need to put some time into teaching our children about money. How is it earned, how to save it and how to go about prudently spending it on what they need. There are many lessons along the way, earning and enjoying what we can do with money; setting budgets, establishing spending limits, saving for something we want, these are all important and exciting lessons.
The ability to understand numbers, how to estimate quickly and how to use money for what we want now and what we will need in the future are all skills the very young can learn.
Where to start with money matters and your children
Giving your children a weekly allowance can be a very useful first step in teaching them how to manage money. Your children could set a budget based on a weekly allowance, then will see what happens if they spend all that allowance early in the week. Perhaps you could even consider lending them money on credit if they run out. The following week’s allowance would then remain the same but less the sum advanced the previous week. They would then need to set a new, reduced spending budget in that following week.
A good approach and one that lasts through a lifetime, is to get your children to set out what the money is needed for, by using an envelope for each item desired. Place the allowance in each envelope and use this as a form of banking. As they get older, why not get your child to keep a record of how they are spending their allowance, this will teach them about net results. When there is some money left over from the weekly allowance, teach them the next step is to accumulate (save), so they can buy a desired toy, game or clothing.
This financial education will have sound results as your children enter adulthood and the workforce. They will appreciate the value of accumulating their savings and earning interest on money held for months, rather than being spent as soon as it is earned.
Learning about finances is like learning another language, and we all know how much easier this is when we are very young.
Eleanor Dartnall (AR 285743), & Dartnall Advisers Pty Ltd (AR 299568) are Authorised Representatives of Magnitude Group Pty Ltd ▪ ABN 54 086 266 202 ▪ AFSL 221557 ▪
General Advice Disclaimer: This information is of a general nature only and has been provided without taking into account your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.