As parents with young children, you may have wondered how and when to start educating your kids about the value of money. At what age should you start? What should you teach them? How much pocket money? Should there be ‘strings’ attached like household chores or completing homework?
While the subject of pocket money may be personable, I’m sure you agree that we as parents want to give our kids the best financial start in life. Finance is not a subject taught at school, so its up to us to educate our kids about money in order to give them a good head start.
We can do this by first introducing them to money concepts from as early as 5, giving them plenty of time to understand and develop good money habits for when they’re older.
As a guide, young children should understand the value of saving and the consequences of spending. These fundamentals should be taught in the early years, as most research will tell you that kids develop learning & character habits from as young as 7 (and it’s the same with their money habits!).
Here are some money concepts for children under 6:
For Young children up to 6 years of age, the most important thing is to “learn patience” when it comes to buying things.
Admittedly, that can be difficult when you’re in the store with your child and they want something right there and then and they start throwing a tantrum! That should be the trigger to get started on this valuable lesson straight away. It’s a hard concept for people (regardless of age) to grasp, and even as adults, some people still don’t fully appreciate or understand the true value of “delayed gratification”. Young kids need to learn that if they really want something, they should wait until they have saved enough money to buy it (in other words, become good savers).
So here are some strategies to help get you started:
Show them examples of how waiting has its rewards: Explain to your kids that waiting for something has its rewards, like when they want you to buy them that $20 toy (and they only have $5). If they are receiving $5 pocket money per week, they’ll need to save for another 3 weeks to be able to buy it for themselves! Keep reminding them how good it will feel when they finally get it.
[Kids are smarter than we give them credit for: at age 5 my oldest daughter asked me if I could give her some money to make up the difference for a doll she really wanted, saying she would “pay me back” in a few weeks once she’d saved enough money! Umm, nice try but I’m not a bank and you don’t qualify for a loan, lol]
Teach them the values of Saving V’s Spending: start with two money boxes, one for “Savings” and another one for “Spending”. For every dollar they receive (whether it’s pocket money, birthday money or even from the tooth fairy), it should be split 2/3 into “Savings” and 1/3 into “Spending”. When you go shopping and they ask if you can buy them something that you haven’t budgeted for, let them buy it with their “spending” money (you might want to remind them to bring their spending money BEFORE you leave the house, as more often than not they tend to “forget” then end up asking you to buy it!). The “savings” money should be set aside for more expensive things they can buy in the longer term once they’ve saved enough to buy them.
Set some goals: you could start with something as simple as having a goal to buy a favourite book, clothing or toy (you know, the thing they just have to have!). It needs to be affordable and within reach, something they will be able to achieve in a short period of time [When I first introduced financial goal setting with my girls they really wanted a Burmese kitten each, but they were too expensive to have as their first goal as it would’ve taken them too long to save up, so make sure they aim for something achievable within a few weeks, not months or they’ll lose interest]. The idea is for them to have a target, and to develop a sense of focus. Once you have a goal, shopping should be a lot easier (and fun), as all you have to do is remind them of what they are saving for!
Encouragement: it’s so important at this tender age, so each time they save money (whether its going towards “savings” or “spending”) give them praise, and sit down with them in their room and help them count how much they have. Talk them through about how close they are to reaching their goal, and countdown the days…
Get your kids excited about saving, I’m sure they’ll love it, and it’ll make your life easier – especially when it’s time to go shopping!
by Steve Luman AFP,TPB, ADFP