Teaching Kids about Money
Children, typically, are not taught about money management in the school curriculum. They’re taught about coins and notes and how to count them, but now how to manage and really understand money. So is it any wonder that so many adults go on to struggle with debt?
There are a number of life lessons we need to teach our children and teenagers – money is one of them. It’s a great way to prepare them for the real world. There are many benefits to teaching your child as early as possible. These include giving them a greater understanding of the connection between effort and reward, why saving is important, and how banks and cards work.
Earning Money (Reward and Effort)
“Do you really have to go to work today?” How many of us have heard our kids ask this in a pleading, “please stay at home” voice? I’m sure for most of us, our answer has been along the lines of a quick, “So that I can bring money into the house and pay the bills”. Children understand that mummy and daddy work – we work and get paid.
This is a very valuable lesson for children to understand, effort equals reward. Pocket money is a great way to reinforce this message.
Banks and Cards (Credit & Debit)
Nowadays, so many of us pay for our shopping with a tap of our card or phone. It’s simple and quick. For children they don’t see money exchanging hands. There’s a disconnect between tapping the card and understanding that the card is linked to a bank account. And that account only a finite amount of money!
Debit card – this card is linked to your bank account. Every time you pay for something with that card, the same amount of money is taken out of your account and given to the shop.
Credit card – each time you pay for something on a credit card, you are spending the banks money. This money does not belong to you – the bank is lending you the money. They don’t do this free. You have to pay a fee for this.
There are some great children’s debit cards out there now. Where you can set spending limits, limit where they can be used, keep an eye on their spending, pay pocket money into, etc.
Saving is an important financial skill to have as an adult, so it makes sense that it is beneficial to start this habit from an early age.
Instead of your child spending their pocket/birthday/Christmas money all in one go, encourage them to save. They don’t have to save all of it but they could get into the habit of putting half into a long term savings account. With the other half they could save for an item they really want or use it as spending money.
Teaching children tips about money while they are young, will help them for a lifetime.