No matter how young your kids may be, it’s always a good time to introduce them to the basics of money and financial decision-making. By doing so, we help them in forming ideal financial habits, laying the foundation for a financially secure future.
While it is not the norm to open a bank account for newborns immediately after birth, it can be a wise move to kickstart their financial education journey and give them a head start in life.
That being said, it’s not unusual for parents to find themselves struggling to properly teach their kids about managing money. That’s why we prepared a guide for parents looking to inculcate crucial money lessons in their little ones.
Money Lessons to Incorporate Into Your Child’s Learning
Ages: 3 to 5 – Understanding how money works
During their early years, children start to understand financial concepts. It’s an opportune moment to acquaint them with the concept that money has value and is earned through effort and work.
Begin with simple activities like recognizing coins and understanding their values. Have them sort and create stacks of coins with similar values, all while practising counting.
Engage in “pretend” play by setting up a toy store and letting your child imagine that they are the customer or the storekeeper. Get them to think of money as coins which they can use to carry out transactions like buying and selling toys.
Ages: 6 to 10 – Begin the concept of saving and spending
As your kids now understand how money works, consider giving them a small weekly allowance and a piggy bank. Explain that their piggy bank is like a magical treasure chest. Every time they put some money in, they are getting closer to a fun goal like getting enough coins to buy a new toy.
Frame it so that savings is like collecting all those coins and placing them into the treasure chest instead of spending them immediately.
From here, encourage them to divide their allowance into different categories such as saving, spending and donating for a good cause.
Help them in forming a simple budget by establishing spending limits and encouraging saving for significant purchases. This fosters a sense of discipline, patience, and the satisfaction that comes with fulfilling financial goals.
Play fun games like Monopoly or any board games that highlight money management.
Involve your kids when grocery shopping by encouraging them to compare prices and learn how to make informed decisions
Ages: 11 to 15 – Grasping the idea of interest and incorporating healthy spending habits.
This is the perfect time to guide them on how to open their own bank account. Because 18 is the minimum legal age in Australia, they will need a parent to accompany them to open a savings account in their name.
Once that is up, familiarise them with the banking system and guide them through the process of filling up forms to deposit money into their account.
When they receive monthly bank statements, review the deposit transactions together and elaborate on how interest functions in their savings account. Illustrate how their money has the potential to increase over time through the concept of interest.
Demonstrate to your children how to use tools that help with budgeting. Allow them to keep track of expenses and manage their finances using these tools.
Teach them to distinguish between needs and wants, compare prices, and encourage them to think about the value and long-term benefits of their purchases.
Age Group: 16+ – Learning how to handle and maximise value of their money
Teenagers are now getting ready to be more independent and handle important money matters, like managing their budget or thinking about student loans for college. This is a good time to teach them more advanced financial concepts.
Help them understand the magic of compounding by showing how their savings can grow over time in a savings account. Alternatively, introduce them to the stock markets. Allow them to experience it firsthand by letting them simulate stock trading on virtual platforms like MarketWatch or Investopedia Simulator.
Discuss with them the importance of using credit cards responsibly, building a positive credit history, and managing debt wisely. Highlight the consequences of not paying credit card bills on time and explain how this can negatively impact their credit score. Make sure they understand that a good credit score is crucial for future financial opportunities, such as getting a loan for a car or a house.
At the same time, motivate your teenager to seek part-time work or explore entrepreneurship opportunities like starting a home-based business. Engaging in such opportunities will not only teach them about how to earn money but also instil the value of hard work.
It’s not just about teaching them discipline, but also being a role model for your kids
Now that you have an idea of how to teach your child about money at various stages of their life, you can be a role model for them by boosting their financial journey to the next level with Syfe.
Syfe allows you to tag portfolios to your goals, including goals for your children. This way, you can collaboratively set financial goals with your child, teaching them the importance of planning for the future. This gives your child the opportunity to directly experience the power of compound interest and investing.
By integrating money lessons and initiating them into savings and investment portfolios, you not only establish a strong foundation for your child’s financial success but also spark their curiosity about investment strategies and the possibilities for long-term wealth growth.
