Financial Literacy For Kids

Teaching your kids healthy habits around money can take a lot of work and even more patience. However, helping our children to be financially responsible early on will help them cope down the line when the stakes are higher. In this post, our resident money expert and financial advisor Kate Bradley will share a few easy things you can do to help parents start teaching their kids about money

How to talk to your child about money

Talking to your kids about money... sounds almost impossible, doesn’t it? In our increasingly cashless societies, It is harder than ever to start a conversation with our kids about money. We are always tapping our bank cards to pay for purchases, food can be ordered online and turns up on our doorstep, and even the kids rides out the front of the supermarket now offer to let you use your card to pay! To our kids, our credit and debit cards are just magical get what you want passes. So how do you teach your kids about the value of money when money is something they barely know exists?

Teach your kids how and why we make money

Step one is to start a conversation about how we earn money. Your kids see you going to work but need to be encouraged to understand that by doing so, you earn a certain amount of money each week. Help your child to understand that the money you earn gets split between bills, savings and investments, as well as purchasing things or experiences. Once that money is all allocated, we then work to earn more money.

Help your child understand cards and cashless payments

Explain to your kids how your credit and debit cards work - when the card is tapped at the cash register, the card reader talks to the bank to check that there is enough money in the account to cover the purchase. Once the bank confirms that there is enough money, the purchase is approved and you are allowed to leave with the goods you have purchased. If there is not enough money in the account, the transaction will be declined and you will not be able to leave with the goods. This reinforces the message of having enough money in your account to cover the purchases that you need to make and can start a conversation about budgeting.

Budgeting for kids

When you are paying bills, show your kids the electricity, gas, or phone bill and explain how bills work. Explain that you have received a service upfront, and now you are required to pay for that service as you have already used the electricity, gas, phone etc. If your kids are older, you can share with them how you budget for these expenses and prepare them for when they will have to budget for their own expenses. Doing this exercise will be great preparation for when they start paying for their own phone bills, or when they buy a car and have to pay for all the expenses that come along with that responsibility.

Encourage their curiosity

The most important thing is really encouraging your kids to ask you any questions that they have about money. They will be naturally curious about things that pique their interest and will want to talk about that more than any specific money lessons you’d like them to learn. Being open, available, and willing to talk about money is something that will really help set your kids up for future financial success.

6 Fun ways to teach children about money

1. Having a list of jobs or chores that kids can do on the fridge to earn extra money can help them understand the relationship between earning and spending money. If they work hard to do extra jobs, they will earn some extra money for something they’d like to purchase.
2. Talking about needs versus wants, and then linking to money is a great way for kids to start thinking about the importance of not spending all their money just because they have it. A good visualisation exercise is to get your kids involved when you are doing the grocery shopping. 9 times out of 10 kids will ask if they can have a treat or a toy when you are out, and you can use this opportunity to explain how if you have $100, and use $50 to spend it on a toy, then you will only be able to buy half the amount of food that you normally would this week.
3. Encouraging kids to save their money for any new toys or experiences is another good tool to help them understand that they need to work and save for the things they really want. Younger kids respond to visual stimuli, so try something like a piggy bank or mason jar so that they can see the cash and learn what value each of the coins and notes has. Having a bank account for your child that they can look at and see the value of money go up and down can really help them understand what happens if they save or spend.
4. You can also start setting some savings goals with your kids. Do they want to buy a new phone but don’t have the money? Why not encourage them to set a savings goal and provide incentives to meet it. For example, if they need $500 for a phone, maybe say that if they can save $400 in a certain amount of time, you will reward them with the extra $100 they need to buy the phone. This will look different for each scenario and each family situation, however setting goals can be a great way to encourage your kids to start saving.
5. Getting your kids involved in household money decisions allows them to feel like they are contributing to the decision making process. Have a ‘fun fund’ that the whole family contributes to, and the whole family decides how to spend. Everyone has to agree on what the money is spent on and can submit their own ideas on how they think the money should be spent. Older kids can take part in researching and planning the activities, and you can assist them by showing them how to research different deals and cost alternatives.
6. Helping kids share their money is also a wonderful part of helping them learn. If they have a cause they are particularly interested in, they could choose to donate part of their money to that cause. Some parents encourage kids to donate a portion of their money regularly or get them to put part of it away and donate in a lump sum once they determine the cause they would like to support.
   An easy way to implement this in practice for younger kids is to have 3 jars for their money. One jar is for spending, one jar is for saving, and one is for giving. The kids choose how much of the money that they have earned goes into each jar. This gives them a sense of responsibility, and also allows them to understand that they have control over where their money goes.

If you would like your kids to learn some more about money, why not get in touch with Kate today for some kid-friendly money coaching sessions!

Kate Bradley - Money Coach

Kate Bradley has over 10 years of experience as a small business accountant and advisor. Kate brings her significant experience advising on the financial aspects of small business to the BMH team , with a particular focus on the optimisation of systems, budgeting, profitability, and cash flow management.

Kate is extremely passionate about financial literacy on both a business and personal level and strives to empower individuals to take hold of their own financial freedom through education and development. Connect on Linkedin.