Every parent wants the very best for their kids – and this includes financial independence and freedom. The financial lessons learned in childhood will stay with them through adulthood so it is important to start early. Here are 5 things you can teach your kids about money:
How to make tough choices
A mistake that many parents make is allowing their children to have anything they ask for. Even if you can afford to buy your children everything they want, try to avoid doing this as it teaches them that money is unlimited. Teach them to make choices about their money such as not purchasing an item now, but saving and purchasing at a later date when the savings goal is achieved.
The three-jar method
This method is an effective way to teach children how to handle money. Introduce three glass jars, labelled ‘Spending”, “Saving” and “Sharing”. Whenever your child receives birthday money or pocket money, encourage them to divide the money up among the three jars. This will enforce the concepts of saving as well as sharing or giving, while still having leftover money to spend how they please. Seeing their money will also help them understand that money isn’t invisible even though credit cards and tap & go may make it seem like it is.
You won’t pay for everything forever
While this may sound harsh, it’s essential for your kids to realise that they cannot rely on you financially forever. This will hopefully give them the motivation to start saving and rely on their own money for things they want.
Money must be earned
Giving your children an allowance if they are doing chores around the house can help with them understanding the value of money and hard work. Creating an incentivised system, whereby they get a bigger allowance for doing more chores and taking on responsibilities, can further motivate and enforce these values. Ensure that the tasks you assign your kids are age-appropriate but don’t be scared of allowing your children to get their hands dirty.
The importance of hard work
If you have a teenager, encourage them to obtain casual or part-time work. This will introduce them to the real world of employment, teach them about working hard to earn money as well as problem-solving and people skills. It can help them understand how they manage their money as well as the concepts of superannuation and taxation.
FCPA & CA
Shane is a Fellow of the Australian Society of Certified Practicing Accountants and a Chartered Accountant.
Shane’s passion is to consider the clients, the client’s business and taxation affairs with a holistic approach whilst providing business mentoring, business strategies, systems development, taxation advice and taxation planning in order to assist his clients and their business achieve their goals.