The way we manage money is based on the stories we tell ourselves about earning, spending, saving, and investing. And those money stories are generally passed on to us from our parents. That’s why it’s so important for you to teach your children positive money habits.
Here are five simple ways to set your kids up for good money habits later in life:
1. Teach them the value of saving
Every child out there has likely heard the expression ‘Money doesn’t grow on trees’ at least a few times. But telling and teaching are not the same thing, especially when they likely only hear this phrase when they’re being denied something they want.
One way to actually demonstrate the power of saving is to act as banker and emulate a savings account for them. When they get their pocket money, give them the option to spend it straight away, or ‘invest’ it with you. If they leave it with you (say for a week or so – they’re just kids, after all) agree to pay them out slightly more than they put in.
Not only does this introduce them to the concept of interest, it shows them that with patience, money saved doesn’t just stick around – it also grows.
2. Encourage them to get a job
If your kids are still quite young, give them the option to earn some extra cash by taking on additional chores around the home or garden, or doing some extra revision in a subject they’re struggling with at school.
If they don’t want to do them that’s fine – but it also means they won’t get paid. This teaches them that work and money go hand in hand, and lays the foundation for a better attitude to ‘real’ work when the time comes.
3. Play money games
Kids learn best through play. If classics like Monopoly tend to get a little … heated in your family, then don’t forget there are other great options like Pay Day, Cashflow 101 and Game of Life, which can all be enjoyed with younger members of the family.
In addition to spending quality time together, money and property games introduce your kids to the power of appreciating assets. One day, this knowledge might make the difference between them splurging what they earn or saving for a deposit on their first home.
Have a teen in the house? Turn the tables and get them to show you how to play an online money game, or use a budgeting app on their phone. In showing you the ropes, you might just spark their interest in taking better charge of their own financial futures.
4. Buy them shares
One of the biggest challenges with teaching youngsters about money is that they find it difficult to wrap their heads around long-term growth. After all, if you’ve only been on the planet for seven or eight years, investing money for a decade is literally more than a lifetime!
Buying shares for a minor in Australia is actually relatively simple, and a great way both to kickstart their adult lives with a bit of capital once they turn 18, and demonstrate how long-term growth works.
Every year, show them how those shares you bought way back then have changed in value. Aside from teaching them the value of patience in creating wealth, you’re also introducing them to the concept of a diversified portfolio, even if they’re not old enough to understand quite what that means yet.
5. Talk about money around the dinner table
In some households, money gets treated like a taboo subject – especially if there isn’t much of it to go around. But regardless of how well off you are, you still have valuable lessons you can impart. What financial decisions do you regret, and which have turned out to be the best?
We all make mistakes when it comes to money, but opening up to your children about where you went wrong means they might not have to make those same mistakes themselves.
Chatting with your children about their money beliefs is also a great way to understand how good their financial literacy is, and where there are confusing areas you could help clarify.
Why your money lessons mean so much
The habits we learn in childhood can stay with us for the rest of our lives.
Giving your kids a ‘free ride’ when it comes to money might feel like spoiling them now, but it’s going to make adjusting to the real world a lot harder down the line.
On the flipside, the healthier their attitude towards money is when they’re young, the easier staying on the right financial path will be.