We’ve come a long way from dishing out pocket money and hoping kids will spend it wisely. There are a number of lessons that children as young as three can be taught, and it’s up to parents to teach their children smart financial habits.
RateCity has compiled a list of five tips and tricks to teach your child great money habits.
Use piggy bank apps
For the kids who like a more tech-friendly approach, electronic “piggy banks”, or apps, are a great education resource. Children can benefit from visual learning tools, with apps helping them picture their savings goals, and guide them through how to balance earning, saving and spending when they engage with money.
Apps such as Spriggy automatically add up any pocket money you deposit, while making the educational process enticing for kids with lights and sound-effects. They provide a prepaid card that can be used as learning tool, preparing kids to spend money wisely through practical experience “all under your watchful eye,” according to their website. Parents have their own digital account they can use to “manage their children’s’ accounts, set pocket money, oversee savings goals, track spending, instantly transfer funds or lock cards in an emergency.”
Open a children’s savings account
Children’s savings accounts can be simple to use and understand for both parents and kids. They can also be used for a number of educational purposes:
- Teach your child about income – depositing pocket money regularly into their savings accounts paves the way for understanding the concept of earning income in exchange for services, such as chores.
- Teach your child about budgeting – use a savings account to help show your children how to spend some money now, and save some for later.
- Teach your child about interest – a savings account with a competitive interest rate is a simple way to teach your children harder financial concepts like how compound interest works.
Take kids grocery shopping
If you want to avoid the tech, a simple task like grocery shopping is a great, real-life way to teach your children about budgeting and smart financial decision-making. Work alongside them to set a grocery budget and compile a shopping list.
Once they’re in the store having a strict budget will help to teach them financially savvy habits such as not always choosing the more expensive, brand name item when you can choose a cheaper brand that serves the same purpose.
Children may be tempted to buy toys or sweets. By reinforcing the idea of only having a set amount to spend you can help them to a) afford extras like lollies through smart budgeting or b) understand they can’t always spend money on treats and to be responsible in their shopping choices.
Create a savings goal tracker
Setting a savings goal for a bigger item allows children to learn patience and forward planning. Create a savings goal tracker with your kid where they can colour in small saving intervals until they hit their goal.
They’ll see their savings grow week by week until they can afford their wish list item, such as video games or a new bike. By having a visual reminder of their savings goal around them they’ll feel encouraged to save and not spend their pocket money right away.
Let kids overspend
Letting children make mistakes with money is still a great way to teach them to not practice those bad habits when they’re older. It happens to the best of us, and if a child spends all their pocket money in one go instead of putting anything towards their savings, they’ll quickly understand that they’re now further away from their savings goal.
You also may feel tempted to help them out, but fight the urge as it’s easier to break the habit of over-spending before they’re old enough to get into debt on a credit card.