It’s not enough to simply tell your kids that “money doesn’t grow on trees”. Here are three ways to set them up with good spending habits for life.
By the time a child reaches their seventh birthday they may have formed money habits that will take them through to adulthood.
That means the younger you start teaching them the basics of finance, the better.
And while it might seem trivial now, instilling good habits could save them hundreds of thousands of dollars over the course of their life.
It doesn’t have to be a drag either, as you’ll see below.
Method 1: It’s Party Time
Why organise your kid’s next birthday party when you can get them to do so instead?
While it may sound like a disaster waiting to happen, ASIC’s Party Time has done a pretty good job of developing appropriate guidelines.
Kids choose how many friends to invite, what their party theme will be, and select food, drink, and activities for the party.
Rest assured your child won’t be getting their cake and eating it too. They’ll need to stick to a budget, decide between needs and wants and make wise financial decisions. All while enjoying themselves, of course.
Method 2: Sal’s Secret
Sal’s Secret is another ASIC initiative to help kids develop smart financial habits. The digital book introduces students to the concepts of planning, goal setting and saving.
Sal’s older siblings, Colleen and Jamie, are planning to throw her a surprise birthday party.
Piecing together clues, including suspicious receipts and strange behavior, Sal eventually discovers the secret they’re hiding.
The idea behind the story is to introduce kids to the importance of keeping track of spending and saving.
It also incorporates basic math skills, with kids given a chance to practice addition, subtraction and multiplication.
Method 3: Pocket money
Every parenting technique differs, and there’s no hard and fast rules when it comes to paying your kids pocket money to help teach them about earning, saving and budgeting.
ASIC advises that so long as you think it’s right for your family, pocket money can be a great way to develop independence, patience and goal setting skills.
How often you pay them is ultimately up to you. It’s suggested that you start weekly when they’re young, before working your way up to monthly payments as they grow older. This will help teach them how to budget over longer and longer periods.
If you decide to pay them for chores – rather than an automatic periodic payment – be sure to make it clear on what jobs they will be paid for, and what jobs the family expects from them regardless of pocket money.
You should also help guide them on how to spend their pocket money.
Ensure that whatever budget or framework you set up, your children are saving or investing about half of it. They should then spend a slightly smaller portion of it, and if you wish, donate about 10% to their favorite charity.
If only all our own grown-up budgets were so clear-cut, right?
Unfortunately, Sal’s Secret probably isn’t going to cut it for the adults.
If you’re having budgeting issues of your own, always know that you’re welcome to visit us. We’ll discuss your financial goals and help you put in place a plan to reach them.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without the prior written consent of Finance Matters, which is where this article also appeared.
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