Is your child money smart?
In Australia’s current economic climate, budgets and personal finances are in the spotlight. Australians are faced with the impact of climbing interest rates, rising petrol prices and housing costs, in addition to everyday living expenses like bills and groceries. Financial education from an early age is becoming more important than ever.
In September 2007, the Australian Literacy Foundation released the results of a survey of over 500 young people aged 12 to 17. Of those surveyed, 59 per cent said that ‘financially, I like to live for today’. In addition, 62 per cent saw money as ‘just a means to buy things’, and only half reported saving regularly - suggesting a focus on financial education for young people would be valuable.
Australian company Kids Money is one organisation aiming to improve the financial literacy of children aged 5 to 12. They offer programs for schools and have a variety of online resources for parents.
Managing director of Kids Money, Greg Smith, urges parents to think carefully about the lessons they are teaching their children when it comes to money.
‘The things kids see, what they hear and how they interpret their parent’s approach to money is absorbed, whether a parent realises it or not,’ says Greg.
With this in mind, Kids Money are organising National Savings Day. National Savings Day is a program that provides primary school children across Australia with the opportunity to participate in a financial literacy program that aims to teach them lifelong money skills and hopes to raise over $1 million for 20 children’s charities.
The program begins in May and culminates with National Savings Day on 20 October. Catholic schools around the Parramatta Diocese are able to participate. Teaching children about financial and social responsiblity is a vital part of a Catholic education.
The MakingCents initiative, created by Citigroup and community service organisation, Young Women’s Christian Association (YWCA) NSW, also seeks to provide vital education for children in the area of money management. Their research shows that a child’s family is the main source of their financial information. MakingCents suggests that talking to your children about money using everyday experiences can help them develop a healthy attitude towards personal finance.
What else can you do and where do you start?
Some useful tips for teaching children about money...
Handling money
Start by encouraging your child to handle different coins and notes. Play simple counting games using coins as counters. When you go shopping let your child pay the shop assistant and count the change together.
Play shop
Games are a great way to build money-savvy children. Set up a supermarket at home using groceries from the cupboard. Take turns as the shopper and the shop assistant.
Plan your shopping trip together
Before you go shopping, write a shopping list together. A shopping list is an easy way to explain the difference between 'needs' and 'wants'. Ask your child to check off items as you put them in the trolley.
Earning money
Consider giving your child pocket money in return for small chores around the house. Pocket money can be a useful way to explain earning an income.
Set savings goals
Ask your child to set a savings goal. Offer to match their savings or ‘pay interest’ as a further incentive.
Establish savings habits
Encourage your child to develop good savings habits. One way to do this is to open a bank account. Take the time to explain any transactions on their monthly bank statement.
Discuss purchasing choices
Talk with your child about how you make spending choices. The next time you go shopping compare products and prices along the way. Discuss which items represent the best ‘value’ for money.
Set a budget
Set a budget for your child's next birthday party. Involve them in planning the food, games and invitation list.
Make money visible
Let children see how you pay for purchases via the ATM, with EFTPOS card or over the internet. Explain that you have to have money in your bank account to use these services. Explain that credit cards are a way to ‘borrow’ money and it must be paid off.
For teenagers, learning about internet banking and electronic money is vital. Paying their pocket money by direct debit into their own bank account can help get them used to intangible payments and help them realise that electronic money is more than just numbers.
Nearly all teens and many younger children now have their own mobile phones; this is a perfect opportunity to introduce them to financial responsibility. Why not put them in charge of their own bills? This is a very quick way to teach them how to spend wisely.
Greg Smith recommends parents avoid loaning money to teenagers for ‘wants’.
‘Try not to lend money to your teenagers for purchases that are of an extravagant nature. If they really want it, encourage them to get a part-time job to save up enough. If you do loan money to them, do so only on the grounds that you will reduce the amount of their pocket money until the loan is repaid,’ Greg says.
Financial literacy is an essential life skill and one that isn’t nearly as hard to teach as it may seem at first glance. Perhaps the most important thing to remember is that children learn by example.
Sources:www.financefirst.net.auwww.kidsmoney.com.au
Financial Literacy, Australians Understanding Money – Australian Government, Financial Literacy Foundation
« Return to student support article topic