Teaching your kids to understand money doesn’t have to be difficult.
Are you worried that your kids are not going to have the skills to manage their finances once they’re on their own?
Most parents want their kids to reach the dream of owning their own home, but sadly, that dream is become harder to reach as time goes on. To help put your mind at ease, we have gathered a few tips that we think will be useful for you when trying to develop your kids finance knowledge.
It’s important to start young
Children tend to soak up information about money from their surroundings. You might not have realised yet, taking your child shopping and paying for your items with cash is teaching them them very basic money handling skills. If you want to help further these skills more, get them to tell you how much change you should get back, or, you could give them your wallet to get out the amount needed. A lot of kids will see this as a big responsibility and will enjoy it. Try and make it fun if you can, they will enjoy it much more!
Explaining the basics concepts of saving & budgeting
As your kids get older, you can start explaining to them the concepts of saving and budgeting. Help them learn how to budget for essential spending (such as food and bills) and how to save for those discretionary expenses, like going out for a movie or dinner. Set them up a savings account and let them join in on the set up process. Explain that here they can make regular deposits with their pocket money to save towards something special. Do they have a savings goal date and amount? Sit with them and work out how much they would need to save every week to reach that goal.
A lot of kids are unaware of what the cost of things are… It might be worthwhile to take them on a tour of the house, show them how much items cost (television, microwave, dining table etc), to give them a good idea of how they will need to budget their money to buy these essentials in the future. Depending on what age your kids are, you could show them the utilities bills. It may not mean anything to them now, and they may seem uninterested, but they will get a basic understanding of the amount they may be paying when they move out of home.
Explaining the concept of weekly deposits into a savings account is one thing, but explaining that the money can gain interest is a whole new ball game. Learning about interest is a very important financial tool for your kids. Explaining this concept may be difficult, but use ASIC’s MoneySmart Calculator to help show how much interest they can earn using a long-term strategy. Basically, if you explain the concept in a simpler form – save money and getting ‘free’ money on top of that if you save over a long period of time – they may understand and be more interested.
Encouraging casual work
Sometime they might get comfortable with the concept of receiving regular pocket money and may not be interested in earning money of their own. But, it’s very important to encourage your kids to get a casual job (once they’re at an appropriate age obviously). This is very important as they will learn a good work ethic (hopefully) that can then be carried on into their adult work-life. Most importantly, it shows them what a dollar or two is worth to work for and that is when the value of money is made.
Explaining property data
As your kids get older, you can start to explain more complex financial information to them – such as investments and rising property prices.
It may be worthwhile to gather property data and teaching them the basics of inflation by showing how property prices have risen over the years. Remember the more you explain the more knowledgeable they will be and the more confident you can then feel letting them out of the ‘nest’.
Start teaching them these simple things from a young age and continue doing so for as long as possible. Providing them with knowledge from your own experience is priceless!
If you’re thinking about buying your kids a home now or in the future, that’s where we come in. We can help you find the right option.