Developing financial literacy early
Like the ‘birds and the bees’ talking about money with our children is a conversation we’d like to put off. We want to protect our kids from our financial worries and conversations about money, but in fact talking about money to children at a young age can help them develop a better understanding of their personal finances, create good money habits and prepare them for the financial challenges of adulthood.
It’s hard to know when to start talking to your kids about money, and what they need to know. Kids probably know more about money at any given age than we think they know, but they might be confused about how things work. As so many transactions are now performed via credit cards, internet banking and online shopping, it’s hard for children to understand that this ‘invisible money’ is not an unlimited resource.
3 tips to develop your child’s financial literacy
Encourage children to perform chores for their pocket money, rather than just giving them an allowance. This way kids can learn about the relationship between work and income.
Ensure that children understand they will need to save up their pocket money if they want to buy an expensive item.
Kids quickly learn how to spend money as they see us doing it so often, but we forget to bring them along when we save and invest.
Encourage your child to use a piggy bank so they can count their money and see it build up and decline depending on their saving and spending choices. Also, set up a bank account for your child and let them see their balances grow with both trips to the bank and internet banking.
Explain with real life examples
Taking money out from an ATM, shopping at the supermarket and opening a power bill are all great ways to start showing your children the value of money.
When you are at an ATM, explain that the money does not just come out of a hole in the wall but is linked to your account. When shopping with your children, discuss how there are cheaper and more expensive versions of the same product, and show them how to compare prices. Opening physical bills or viewing them online with your child is important for their understanding about household costs, such as water and the internet.
It’s important for parents to educate children on their personal finances, as often this is overlooked in school. Without developing a sound understanding of savings, investment and debt in childhood and adolescence, people are more at risk of learning these financial lessons the hard way.
If you need assistance managing your debts and financial situation, contact the team at Life After Debt on 1300 237 669.