Tips for Children and money

In today’s world of technology and gadgets, it can certainly be tough to teach children a sense of being prudent or frugal with money.

We have to keep in mind that these days they will rarely see money spent any way other than from a machine in the wall or seeing their parents handing over a plastic card to obtain whatever they purchase.

The thought as to where money actually comes from is unlikely to cross their minds unless they are educated from an early age. If they are not taught to manage it effectively when they’re young, they are highly likely to have problems when it comes time to handling money as an adult.

So how do you teach them?

The answer is to start young and be firm. Children who get everything they ask for will generally never learn the value of money.

As soon as they are old enough to understand, say five years old, parents should consider giving children a basic weekly allowance – something the parent can easily afford, even if it is a gold coin – for completing an easy, daily chore. When the allowance is spent they get no more for the rest of the week. As they get older, consider increasing the amount in line with extra responsibilities to be fulfilled.

Other ideas you could try include:
•Talk to your grandchildren about money – discuss saving for particular goals. Parents can consider to match their contributions dollar for dollar to keep them motivated.
•Let them make their own decisions – they learn a good lesson by spending their money on something frivolous and then being unable to afford something they really want.
•Set up their own personal bank account – even if they have little in it, they will learn about savings by watching it grow.
•When their savings have reached an appropriate level, help them choose an interest-bearing account – this will help teach them about the value of compounding interest.
•When they become teenagers, talk to them about getting a part time job and show them how to divide up their wage into short term goals, long term goal and even charity so that they can easily manage it themselves.

Being tough with money in the early years may create a few complaints but your children will thank you for it in the long run, particularly when they are ready to buy cars and homes, and are raising their own children.

Olivia Maragna is the co-founder of Aspire Retire Financial Services and has been recently named the Australian Adviser of the Year. Olivia's advice is general in nature and readers should seek their own professional advice before making any financial decisions.

Olivia Maragna