Kids Money Management

As a parent you can help kids learn about money with some hands-on experience of managing real money for themselves. Here are some tips to help kids learn about money:

Kids aged 3 to 7

• Encourage your kids to collect a small amount of pocket money each week in clear containers so they can watch their savings grow.
• Have several different jars for different aims - one for immediate spending, one for short-term savings such as a new toy and one for long-term savings, which mustn’t be touched.

How much pocket money?

Some parents use the method of giving their child a dollar for every year of their age, i.e. a five-year-old gets $5 pocket money. But do what you feel comfortable with and can afford.

• Suggest an item that won’t take too long to save for so they don’t lose interest.
• While shopping, explain why it works out cheaper to buy a large box of cereal instead of two small ones.
• Take them to the bank. Explain what you’re doing there - putting money in, taking it out or paying bills.

Kids aged 7 to 12

• Open a bank account for them. Choose one which has a passbook so they can see a clear record of deposits and withdrawals.
• If they’ve spent all their money but still crave an expensive toy, don’t buy it for them. Children should understand that when money is gone, it’s gone.
• Explain what a sale is and how you can save by comparing prices at various shops.
• To prevent children thinking automatic teller machines are an unlimited source of cash, show them withdrawals on your statement.
• Once you’ve agreed on a pocket money sum, pay it on time, every time. Kids need to know how much they’ve got coming in so they can budget.
• When you pay the bills, explain what you’re doing and the method you use - cheque or direct debit.

Kids aged 7 to 12 can learn:

• how to identify the value of coins and notes
• how many 10c pieces make a dollar
• how to manage a small amount of pocket money of their own
• how to save towards a long-term goal
• how to balance income against expenditure
• how to make deposits and withdrawals at a bank

Teenagers

Ah… teenagers. As a parent you can help kids learn about money, but as our kids reach their early teens, it's our experience that the amounts of money required suddenly increase significantly! Here are some tips to help teenagers learn about money:

• Have them save up for things they want. Encourage them to think of opportunities they have to earn more money - baby sitting, paper round, some other part-time jobs, or helping out in a family or friend's business.
• If they have a major long term savings goal, maybe you can afford to match an amount they have saved at a certain point i.e. for every $100 they save you could contribute $5 or such like. Alternatively, they can use our calculators. Visit the Sorted site to see how various interest rates will contribute to their savings goal.
• Encourage them to keep written records of income and expenditure to reinforce the habit of account-keeping.
• Explain that money borrowed must be paid back with interest. If you only pay the minimum on a credit-card bill, interest charges will mean they’re paying double the price. Make sure they understand both the advantages and disadvantages of borrowing.
• Should you pay or should the kids pay? Consider paying for car insurance if your teenager with a licence doesn’t have a paying job, but ask them to pay for petrol out of their pocket money.
• Focus on your top priority - whether it’s standing firm on not buying what everyone else has, or encouraging your kids to stick to a budget. Explain why if you’re denying something your kids want.
• The next time your kids overhear you complaining about the size of your credit card bill, be specific about the consequences of carrying a balance. Showing them the numbers will help make your point. Teenagers should know that bills have to be paid, and that taxes will be taken out of their pay.
• Encourage your kids to be aware of the relationship they are developing with money - are they more inclined to spend or save? If they have a paid job, encourage them to put part of their earnings aside for something they want to do or buy in the longer term.
• Turn everyday encounters with cash machines into informal lessons about money management - talk to your kids about money.  It’s from family discussions about subjects like “How much money do you make?” that children will learn their most lasting lessons about the value - and the values - of money.
• Encourage your kids to pick a company or two and follow the share price in the newspaper or online. Consider buying them a few shares to encourage their interest.
• Find out what’s happening at school to encourage financial awareness.
  Be aware - kids learn about money just by watching and listening to you.
  Help to resolve conflicts over family expenditure by talking about your financial goals.
• If your household is running on a tight budget, be open with your kids about that and help them to understand that if something is bought today, the trade-off may be there’s no money for something else tomorrow. Be candid, consistent and use your own good common sense.
• Talk about money with your kids. Like everything else, they learn when they have their questions taken seriously and answered thoughtfully. When it comes to money, never assume children will pick up the most basic facts on their own.
• Be consistent. If you’ve made a rule or an agreement about money with your kids - be decisive and stick to it! In summary, treat teaching your children about money as a natural part of everyday life. It can’t create happiness, but it can create choices.