How to Encourage Kids to have a Positive Relationship With Money
Budgeting skills are something every adult knows about … to a certain degree. But do you remember where you picked up your budgeting skills? Did we learn it through osmosis because our dad was a great banker or our mum the best homemaker who could balance the books on a dime? Maybe we learnt it all from high school accounting. Or, when we got our first paying job? Perhaps your school had a visit from the Commonwealth Bank Dollarmites?
Unless you were a child with a particular interest in finance, most of these lessons were likely forgotten as you transition into adulthood. This is a really unfortunate reality because budgeting is something all adults should master from an early age. So how do we peak children’s interest, and retention, for budgeting? The answer is two fold: keep them engaged by making them accountable. And the second part is to make it fun or rewarding for them. Here are some tips for each developmental stage of your child’s life.
From 3 to 8 years = Spend Save Share.
3 years of age may seem young, but it is found that children learn so much in their formative years, making this is a great place to cement great habits.
Forbes is passionate about encouraging children to develop a positive money relationship. They recommend a few activities for children aged 3 to 5 one of them involves jars:
Take 3 plastic see–through jars and give the child 3 dollars a week (in $1 coins). Label one jar ‘Share’, the next ‘Save’ and the third jar ‘Spend’ and put 1 dollar in each. Your son or daughter can experience the joy of giving, whether it be at church or to a charity of their choosing. The second jar they will save for something big; but big in the eyes of a child. It might be a $5 toy, but the point is to save for it. And, the third jar, your child can spend on stickers or lollies or whatever you agree is appropriate.
The concept of the jars is to set them up with the foundation of having to give some away, be it to actual charities or bills, to save for bigger things like a home or car registration and spend a little on leisurely things.
From 10 to 15 years = keep it fun but challenge the status quo.
Once you have done the ‘Spend, Save, Share’ principle for a few years, you will notice that some of your children are happier to save and others are happier to spend. Now, the challenge is to find ways to encourage them towards the other in fun ways to help money not be a burden for them later in life.
For example, get your children to help you do the Christmas shopping for a sibling. Allowing them to choose between items and evaluating the quality, quantity etc. while fully aware of the costs involved, gives them a greater understanding of the concept of ‘money’. This will then foster an appreciation of spending on things which are truly valuable to them.
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From 16 to 18 years = Responsibility
These are the ages when taking on some responsibility becomes an important step. Most children in these age ranges have mobile phones or are becoming more social. So, now is the time to make them accountable for the money they are spending by asking them to buy gifts for their friends’ birthday parties or pay for their own phone credit or bills, for example.
Once they get used to these regular expenses you can then encourage them to save for their next biggest item: a car! Trust us, they will find great satisfaction in knowing they achieved this for themselves than if you just handed a new car on their 16th birthday.
Quick Tips
- We don’t agree with giving children an allowance for nothing. So, rather than just immediately give children ‘free money’ once they reach a certain age, encourage them to earn it. Have them do particular jobs around the house and put different charges on those items to encourage them to calculate their earnings, i.e. feeding the dog might earn them $1 a week, whereas washing the car might be $5.
- Never shy away from talking about money or doing the budget in front of them. Teach children that money conversations are a natural and non-scary part of life.
- Once they get a part time job, it is okay to charge them for room and board.
- Help them create a visual savings goal. Whether it be a picture on the fridge or a chart they colour-in when they add to their savings, visual stimulus can help keep them on track.
- Never criticize if they get it wrong or choose to dip into their savings. We have all done it. But, help them get back on track and encourage them to avoid the unnecessary dipping.
Budgeting with kids doesn’t have to be scary or tedious. Remember the end goal is to encourage them to form a positive relationship with money. Not all kids are going become accountants, but if we can at least help them avoid expensive mistakes when they are older, it is a win.
For more tips or guidance on how to have positive money conversations with kids, please do not hesitate to contact Synergy Accountant and Estate Planners.
The advice contained in this blog is intended as a guide only and should not replace the advice sought by from your trusted financial adviser or accountant.
