How to Teach Kids About Money
Who else remembers how much pocket money they received as a kid? Or the experience of finding a gold coin left by the tooth fairy? Or saving up to buy that thing, whatever is was, that Mum and Dad wouldn’t buy you so you had to save up all by yourself?
If any of these memories has struck a chord, it might be because money is a larger part of the average childhood than you might originally think. According to Sunitha Chamala, financial planner and member of the Financial Planning Association of Australia, your childhood experiences play a significant role in shaping attitudes, beliefs and behaviours about money. She continues by saying “These habits stick with you for life, and establishing those habits in children is much easier than trying to change them down the track. Changing bad habits, later on, is much harder than instilling them from the beginning”.
Furthermore, Chamala says that one of the most important things to do, as a parent, is to avoid raising your kids with a false sense of entitlement. This since you don’t want to encourage a situation where kids feel entitled to expensive toys, gadgets or trips without having to earn them. According to Chamala, this can result in that the child grows into an adult who lives beyond their needs, get themselves into debt and live paycheck to paycheck. She also suggests parents encourage delayed gratification as a concept rather than instant, and to help your child to indentify the difference between what is a need and what is a want.
“It’s important also that children understand you need to work to earn money, as well as concept of saving for rainy day”, says Chamala. Of course, much of this is easier said than done, especially as a parent who wants to give their child the world. However, Chamala raise the importance to encourage your child to work towards a goal, especially if it is something like saving for an item that falls into the ‘want’ category.
“If your child wants to buy something, you can help them to save money from their birthday money or weekly allowance, or offer them the opportunity to earn extra money for helping around the house”, suggests Chamala. “By involving them in the purchasing process, you are helping them understand the value of a dollar and what that means in the wider scope of things”.
Lessons surrounding the relationship between children and money shouldn’t begin and end with pocket money, either, but be carried through into young adulthood. According to Chamala parents should encourage their teenage children to get a casual job. By doing so it can be up to the child whether they want to spend or save that money.
“It helps them establish those habits themselves rather than being lectured by the parents”. Chamala also says that it is, as a parent, highly important to practice what you preach by demonstrating and reinforcing attitudes in the home. “If you adopt a consistent approach to your attitude towards money, this will be reflected in your child’s attitudes towards earning, spending and borrowing money” says Chamala.
Of course, all of this isn’t to say a child needs to save up for every single thing their heart desires. After all, many things are considered quite normal in an Australian household these days, such as a tablet, would be way out of reach for a child subsisting on solely pocket money.
When it comes to buying expensive toys and games, most kids don’t have that kind of money lying around. However, Chamala still suggests that you have your child contribute to those things. For example, if you buy your child an iPad, have them have to contribute 50 dollars towards before they can get it. In doing so, you avoid that instant gratification that will follow into adulthood.
Lastly, Chamala says, “If you don’t earn it, you don’t deserve it”. // Chamala finishes off by saying, “If you don’t earn it, you don’t deserve it”.