Teaching your kids about the family finances

May 13 2013. Posted in News

Image of 1life logo Ask a child where money comes from and you may get responses such as, it comes from Mommy or Daddy, the ATM or that the government prints you some when you need it. Teaching them about the real value of money will probably be one of the biggest challenges facing a parent.  

If you get it right though – you can teach your child to differentiate between needs and wants and most importantly, how to budget and how to save. In this instance the best way to teach them is by setting a good example and practising what you preach. Here are a few tips to get you started:

1. Teach them about the importance of hard workGive your kids simple age appropriate chores to complete that offer small rewards. Even toddlers can get involved by helping to set the table, sweeping the floor and picking up toys. Praise them when they have done the job and perhaps set up a small reward/allowance system.

2. Teach them to budgetDon’t forget that once money is earned you need to explain to children what to do with it. To motivate your kids to save, ask them to make a list of the things they'd like to buy and then help them to work towards that goal. Put a chart on the fridge to remind them of their goal this will help keep them focused on saving.

3. Teaching them to plan for the futureRemember the story about the Ant and Grasshopper which provided the reader with a moral lesson about the virtues of hard work and planning for the future? The story teaches that it is better to prepare and expect hard times rather than just living in the moment. A very good way to teach children to prepare for the future is to find something that he or she would desire in the short-term future and help to compile a plan that will allow them to meet this goal.

4. Factoring in age  How old should a child be before you start teaching him/her about finances? From around 3 - 4 years, start by simply taking your children along on your monthly shopping trip and ask them to assist you in making shopping choices, this will teach them what is essential vs. unnecessary based on the affordability of the item. Through the exposure of principles, such as budgeting, expenses, saving, responsibility the value of money will be learnt.

Pocket money also plays an important role in educating your kids about their finances. The amount of money that a child receives should correspond with the age of the child – but should also be determined by your own budget. The importance of teaching your child to save pocket money this early will create a culture of saving which will pay off in their teens and even adult years.

5. What is debt?Younger kids will understand the concept of borrowing a toy, so discuss how in that case borrowing meant your child returned it when he was done and that he/she would be in debt until that item has been returned completely. Also educate them on the difference between bad and good debt – as certain debt can be seen as an investment – like buying a house. Another practical example is to let kids borrow money from you – making sure that they fully understand when and how the money has to be repaid.

The key to raising your child with a healthy attitude to money is to lead by example. As with everything your children will copy and reflect your attitude to money. Your child can learn the basics of making responsible financial decisions early on and they will carry that teaching on through their adult life.

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