Financial Planning

Kids and Money – it’s Never too Early to Start

2 November 2022

When teaching your children to manage their money you are helping your kids grow into financially savvy adults. You might even learn something about your own money habits along the way.

Children see money nearly everyday, and as they become old enough to recognise the currency value on coins and notes they’ll want to start counting – just be mindful that very small children and coins don’t mix well.

If you decide to give children pocket money or to pay them for doing age-appropriate chores, encourage saving by giving them a moneybox.

We love using the Money Jar strategy for young children, whereby you have 3 ‘Jars’ to separate pocket money:

Jar Number 1 – Savings

This could be to invest at a later stage or for a bigger purchase they may want to make such as a bike or scooter. (We recommend investing to build good habits early)

Jar Number 2 – Spending

This is usually for your smaller consumables items such as going to the movies, an ice cream or small toy / game that they are interested in.

Jar Number 3 – Giving

This may be in the form of a donation to a charity close to you or a gift at Christmas time through an organisation such as the Salvation Army, to someone who may be less fortunate.

As they get older, open their own bank account. Explain how interest works and talk about their savings goals. If, for example, they want to buy a new bike, discuss how much it will cost and how much they will need to save each week.

When your child is old enough, introduce them to their bank statement and point out any fees and charges. Children of all ages often assume that ATMs supply unlimited cash. When making a withdrawal, show them the receipt and explain how the balance has reduced.

The humble mobile phone can be used as a great opportunity to teach kids about meeting financial obligations. Show them how to put aside money for bills, allocating the remainder for savings and spending. There are many great apps that can help your children understand budgeting early and set them up with good financial habits for a life time.

Part-time jobs are a standard way for teenagers to earn money and choosing how to spend it. A debit card on their bank account will give your kids an early introduction to how “plastic” works – particularly when it’s so cool to ‘tap and go’. Except with a debit card, when there’s no more left, there’s no more left. Resist the temptation to top up their account if it hits empty.

Learning early that plastic money is not limitless can avoid a lot of grief later in life. The Reserve Bank of Australia reports that there are currently more than 15 million credit cards in use in Australia. Across those cards, there is more than $31 billion accruing interest every month! Nobody wants their child to add to those statistics.

However, not all debt is bad; few people can buy a home without a mortgage.

Your child’s first debt will likely be a car. It’s tempting to help financially but you’ll probably do them a greater service by encouraging them to borrow if they have not saved enough. Not only will they earn their own credit history, they will understand the importance of borrowing, the effects of interest and price.

If you decide to lend money to your offspring, establish a repayment schedule and be strict.

Teaching your kids good money habits early is a lasting gift that can really make a difference.

We’re always ready for a chat about your family’s financial wellbeing, from assisting with cashflow and budgeting we are more than happy to help.

Get in touch today!

Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.



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