When teaching your children to manage their money you are helping your kids grow into financially savvy adults. You might even learn something about your own money habits along the way.
Children see money nearly every day, and as they become old enough to recognise the currency value on coins and notes they’ll want to start counting – just be mindful that very small children and coins don’t mix well.
If you decide to give children pocket money or to pay them for doing age-appropriate chores, encourage saving by giving them a money-box. Get yourself a money-box as well and each time your child puts money away, do so yourself. It could be good for you too!
As they get older, open their own bank account. Explain how interest works and talk about their savings goals. If, for example, they want to buy a new bike, discuss how much it will cost and how much they will need to save each week.
When your child is old enough, introduce them to their bank statement and point out any fees and charges. Children of all ages often assume that ATMs supply unlimited cash. When making a withdrawal, show them the receipt and explain how the balance has reduced.
The humble mobile phone can be used as a great opportunity to teach kids about meeting financial obligations. Show them how to put aside money for bills, allocating the remainder for savings and spending.
Part-time jobs are a standard way for teenagers to earn money and choosing how to spend it. A debit card on their bank account will give your kids an early introduction to how “plastic” works – particularly when it’s so cool to ‘tap and go’. Except with a debit card, when there’s no more left, there’s no more left. Resist the temptation to top up their account if it hits empty.
Learning early that plastic money is not limitless can avoid a lot of grief later in life. The Australian Securities and Investments Commission (ASIC) reports that the average Australian credit card holder owes just over $4,200 per card, on which they pay around $690 interest each year! However, not all debt is bad; few people can buy a home without a mortgage.
Your child’s first debt will likely be a car. It’s tempting to help financially but you’ll probably do them a greater service by encouraging them to borrow. Not only will they earn their own credit history, they will understand the importance of borrowing, the effects of interest and price.
If you decide to lend your offspring money, establish a repayment schedule and be strict.
Teaching your kids good money habits early is a lasting gift. And as the line goes - if you ever think no-one cares about you, try missing a mortgage payment!
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