Disclaimer: this is not advice, but merely a blog to get you thinking about how you could teach your kids some financial learnings.
Navigating the financial landscape for your kids is hard - there’s no ‘one size fits all’. Just as we all have different spending habits, incomes and priorities, setting our kids up for financial success looks different to everyone. But, the common thread among us? We all want the best for our kids.
Before we kick off, consider this: when constructing a house, you ensure the foundation is solid before building the structure. the same principle applies to setting your kids up for financial success. Without a sturdy foundation, you may become vulnerable to challenges - so think of your own financial stability as the foundation for both you and your children. When planning for your own financial security, including life insurance to support your family should be a fundamental part of your financial strategy in setting your kids up. It’s safeguarding their future.
When do you need to start thinking about it
Research indicates that children begin grasping money concepts from as early as three years old. At this age, they’re not only counting their numbers but observing their surroundings, particularly their parents. Simple financial transactions like purchases at the checkout are already making an impression. As the years progress, it’s important to teach your kids financial understanding. Here are a few topics we found are popular to cover off;
The value of money
It’s important to teach your children the value of money - how much effort is needed to earn a dollar. Understanding the value of money can be a challenging concept to teach, but here are a few ideas;
- Use a piggy bank as a visual tool to show their savings
- Depending on your household chores system, associate a cost for each chore so they learn the association of time and effort exchange.
- Grocery Store challenge → show your children the price comparisons on the same product and how and why you chose each one based on value. See if they can do your grocery shopping on a budget one week.
- Different money jars for goals - help your child split up their allowance into how they’d like to spend it. A great ‘extra for experts’ is making them pay taxes (this is also a great way to start a savings account for your children that you could pass on when they’re old enough).
Budgeting seems to be looked down on in finances, but it’s teaching an important skill of earning and spending. For example saving for something you want, ,not spending everything all at once and then struggling until the next pay,understanding how much tax you pay in every paycheck. Your kid doesn’t need to have a job to understand this - it can be done with pocket money, chore money or birthday money.
Financial goals differ throughout childhood - just like they do as you grow into adulthood. They might start with saving for a specific toy, sticking to a budget, setting up a bank account, understanding their tax, saving for university or travel and then maybe even purchasing a house. It doesn’t matter what it is, but it’s important to learn to have financial goals to work towards.
Debt is hard to teach as it can be sensitive. If you’re in a position of debt that's putting a financial strain on your family, you may not want to discuss it. But it’s actually really helpful to be open about your finances with your kids. They learn to understand why they can’t have the latest toys or clothes and understand the position you’re in, especially older children. Being open can also help to lessen the pressure you might feel to keep spending. It’s also important to talk about how debt can be useful, such as buying a car or eventually maybe a house.