Teaching kids about money

The strategy: to teach my kids good money habits. How do I do that? It's not easy in an environment where even everyday financial decisions can be complex. 

Paul Clitheroe, the chairman of the Financial Literacy Foundation Advisory Board, cites the example of a child accompanying a parent to the supermarket. Little Johnny watches mum or dad fill the trolley up with goodies, they go to the checkout and the parent hands over a piece of plastic. The checkout person bags up all their purchases and asks: "Would you like cash with that?" The parent understands that getting cash now is a good idea, as it's not counted as an additional transaction in calculating their bank fees. But what message does the transaction send to little Johnny?

Clitheroe says this emphasises why it's critical for parents to talk to their children about money and to explain how and why they do the things they do. With electronic transactions so popular, he says it's important to explain to young children that the money is actually coming out of your bank account and it's not something you can simply pick up at will.

The Financial Literacy Foundation has prepared a fact sheet on teaching kids about money as part of its Women Understanding Money initiative. (And yes, blokes could benefit from it, too.) It emphasises the importance of teaching by example and instilling good money habits in your children by budgeting and saving yourself. An example might be to set financial goals for your family and talk to your children about those goals and how you plan to get there. You can help them set their own financial goals, too.

It says children also need to be taught the value of money. For small children, one tip is to explain what a set amount - such as $2 - can buy. Include your children in conversations about bills and the family budget. The foundation suggests showing older children what bills look like and how you pay them. Let your children watch you pay for things - perhaps allow them to hand over the cash or press the OK button on the Eftpos machine. Talk to them about wants and needs - and how to prioritise their spending. Continued...