As our kids grow, they are constantly learning about the world around them. While some children learn at different rates than others, by and large their educational trajectory will be quite similar.
Teaching our kids about money and saving can sometimes fall by the wayside in the scheme of school and books, but our knowledge of money is something that we carry with us for the rest of our lives, so why not help them get off to a good start? I’ve outlined some key lessons for you to impart to your little ones, and the potential pay-off later in adulthood.
Lesson: Familiarise them with currency
Around the time of kindergarten, when our kids are first learning to count, it’s a great idea to try and incorporate money into the education mix. Have your kids with you at the checkout, ask them to count your money for you, quiz them on which note and coin is which.
Payoff: Your child will have a solid grasp of how money works, how it’s exchanged, and will be able to perform currency calculations in a heartbeat
Lesson: Managing their own pocket-money
Once they’re able to manage a few basic chores, such as cleaning their room, etc, it’s a great idea to start giving them some pocket money. It doesn’t have to be much – just enough so that they can watch it grow in a piggy bank. Let them spend some, but try to encourage them to put some aside for something special – a new toy, for example. Also, try and make it different currency denominations, and reward any extra hard work with a little pay-rise.
Payoff: Multiple-fold. They’re learning the concept of work for remuneration, and they’re also realising the value in putting their money aside and sacrificing their spending for a goal.
Lesson: How Banks Work
When you think they’re ready to graduate from a piggy bank to their first account, make sure you involve them as much as possible in the process of opening one. Research youth accounts and find the best one with the most reward for their good habits.
Once they’ve opened the account, it can be common for kids to think their money is gone, so allow them to make their regular deposits themselves, and be sure to regularly show them their balance figure through Internet Banking.
If you’re able to open your child an account with a decent interest rate, explain that having a bank account and saving allows them to be rewarded with extra money.
Payoff: Your child is learning the value of a symbiotic banking relationship, they learn the safety and security of banking, the satisfaction of being rewarded for good saving, and the value of shopping around for the most beneficial product.
Lesson: First payslip and ATM/EFTPOS card or Debit Card
Once your little one grows towards adolescence, they’ll gravitate towards financial independence, but they still have a few things to learn. Once they start part-time or casual work, they’ll have a regular income source and have to start making decisions for themselves. They’ll also come face to face with income tax for the first time.
Make sure you explain that just because they have more money, the situation has not changed. If they spend all their money, they’ll have nothing left for a rainy day. And walk them through the reasons we all pay tax – we all contribute so that the society we live in is maintained.
They’ll also be wanting more access to their money during this period as their freedom increases. This usually comes in the form of an ATM/EFTPOS card or Debit Card. It’s worthwhile explaining the responsibility of greater access – they’ll need to take great care of their card and PIN to keep their money safe. Also, warn them of the temptation they may feel to spend more given greater access to their money.
Payoff: They’ll get an understanding of taxation, they’ll be forced to begin budgeting for themselves as their income increases, and they’ll learn valuable lessons about financial security.
At Greater Bank, we fully believe in giving young people a fair go when it comes to starting their financial education. That’s why we launched our new Life Saver Account for those under 25. Life Saver is simple – it rewards continued saving habits with a higher rate of interest, and it offers the chance to enjoy transaction-fee-free banking. It can be opened by your child, or on your child’s behalf.
To find out more about our Life Saver Account, click here.
If you’ve got a reason why you think it’s important to teach kids about money early, let us know in the comments below. And if you found this blog helpful, why not connect with us on Social Media for regularly updated content?