This will be the first in what I hope will be a series of blog posts about how you can empower your children by giving them practical skills in money management. Financial education for children is a passionate subject area of mine. I believe that if money management is/was taught formally, much of the financial problems that people face in their daily lives could be avoided. I heard a quote the other day which suggested that the poorest person in Australia is one of the richest people in the world. If that is the case, we shouldn't all struggling so much just to make ends meet and we don't have to.
Children learn about the world from a very young age. Everything you do and say is taken on board as they soak up knowledge. Therefore I suggest that there is no minimum age in which you begin to teach your kids about money. So here are some things that you can do starting right now, no matter how old your child is, to begin their positive financial education.
1. Be aware of what messages your are sending
Children learn from what you do, far more than they learn from what you say. It is difficult to tell your child not to swear if you are using profanities in every sentence you utter. It is the same with money. You may not think that they know anything about your financial situation but they will pick up on subtleties that you don't even think about. If you pull out your credit card for every purchase you make, they will know and subconsciously develop the opinion that this is a good thing to do. If you ask for a receipt for every purchase you make and then check these against your bank statements every month, they will learn this as well. Do they get the catch-cry, "Money doesn't grow on trees you know" when they ask for something or do they get taught value by identifying priorities for how and when they will spend their pocket money? If you don't know what ideas your children are getting about money, ask them (if they are able to talk), and be aware of what you are doing and saying in front of them.
2. Discuss money with your kids
I know of some families who find it difficult to talk about money. For some reason it is a taboo subject. So when they have to discuss something, it's a strained conversation and often put off for too long. Make money a subject that your children feel confident in discussing with you. If they have a question about your financial situation, answer them truthfully instead of brushing them off with a half answer or a smart remark.
3. Find a way for them to model good habits
To learn the value of money, you really need to be handling it yourself. Some people don't begin their financial education until they get their first job and then often they make huge mistakes and end up in trouble. Trial and error is not the best way to learn money management. I've also found that being told what to do can only take you so far. Instead, show your kids some good money management by giving them some responsibility with money. One way to do this is with pocket money. The younger the child, the more important it is for the money to be tangible so give them cash. If you want them to save it, don't put it in the bank for them so that they never see it, this teaches them nothing. Instead give them two money boxes or jars to put it into. Say that they represent different bank accounts and make one a savings account and the other a spending account. Make sure that a minimum of 10% of their pocket money goes into the savings account and don't let them spend this on anything that does not make them money. If they want to save for a consumable item, then a third jar might be necessary. Your children will learn quite quickly how money can accumulate if saved regularly. For older children, you might set up actual bank accounts but make them responsible for depositing the money themselves. They can easily see how their money is growing by registering for internet banking.
I'll put up some more practical strategies for teaching money management to your children in subsequent posts. In the meantime, check out my older posts for ideas and see if you and your children can work out a way to implement these strategies together. If you have some strategies that work or you come up with some new ones, leave a comment so that other readers can also benefit from your creativity.