I was recently interviewed by Sarah Morrissey the Founder and multiple award winning entrepreneur from Little Rockers Radio (www.littlerockersradio.com.au), an Australian based digital radio station that offers entertainment and parenting advise for children 0-5. We chatted about when to start teaching children about money, what to teach at what age and the impact of financial education when it comes to digital banking and online shopping. I made some notes from my interview answers and have included relevant additional information to the questions below.

As you read this article, I want to remind you of one important truth – your inner guru is a teacher and warrior of your own personal finances. Implementing two new habits a year amounts to 10 better ways of living over the space of five years. It is never to late to ignite the inner financial guru within! 🙂

AT WHAT AGE DO YOU START TEACHING CHILDREN ABOUT MONEY?

As parents we are teaching our children about money every day. Ask yourself the important question, “what am I teaching my children about money?” From here we can also ask ourselves ….is there anything I need to add/remove from my behaviour to improve my child/ren’s learning’. For example, if you love to shop for clothes or purchase impulsively, a two year old will understand this concept. If you love to paint or spend your time gardening, a two year old will understand your passions from an early age.

Parenting gives all adults the space to become the best versions of ourselves and hence understanding what you wish to teach your children allows us all to improve our own skill set.

When it comes to financial education there are three important elements to navigate and nurture

  1. Knowledge
  2. Habits and Mindset – which determines your decision-making. This is the game changer for financial success. If you believe you are good with money and learn the power of positive beliefs…your actions and decisions will follow.
  3. Time – ongoing learning and development of new habits brings about positive changes in your financial success journey. Do not beat yourself up if you believe you are behind in achieving financial success. Making educated and steady changes to your lifestyle will move you closer to your goals.

WHAT FINANCIAL SKILLS AND HABITS CAN BE TAUGHT IN DIFFERENT AGE?

Only you as a parent will know at what age your child is ready to learn new skills. Education is at the heart of what you know or what you learn yourself. If you lack confidence in your own money skills, you can refresh your knowledge very quickly and learn the fundamental skills around financial education. This is the ability to make educated and responsible decisions around personal finances.

1-3 Years (nurturing the power of language and behaviour)

Children mimic parents from an early age. 1-3 is a useful age to nurture positive beliefs around money through the power of your language.

Use simple statements that will encourage understanding of concepts and positive attitudes around money

“Mummy and daddy are saving for …”

“Let’s make a list before we go shopping. What do we need?”

“Was that a wise use of money” (as opposed to using statements like “we can’t waste money”)

Do household chores with your children until they can manage themselves

When you make their bed, let them help you.
Help take their plate from the table to the sink.
Help set the family dinner table.

Once they can do these chores by themselves a young child will take delight in doing the tasks independently. Yes, extra time is involved in doing this with your child but the investment in this time has nice dividends. Attitudes can change when these habits are not learnt early an developed as a habit.

How do these relate to money? It’s about developing a sense of serving and community in the family (opposite to entitlement).

Refrain from impulse purchases 

As much as we love to see the delight on our children’s faces when we treat them to a random ice ream or new toy, be mindful of what expectations this develops in children. If you are going to reward your child with the ice cream or toy, have a purpose behind it. It can relate to good behaviour or a need. A mindset is created through habit and behaviours.

Open a bank account in your child’s name

Time is your friend when it comes to savings. Albert Einstein quoted compound interest as the eighth wonder of the world. You can set up a monthly direct debit for your child and it is a handy option for relatives and friends at birthday and Christmas time.

Young children 3+ (the time to make money tangible)

3+ is the perfect time to start nurturing positive language and behaviours if you have not already began. If your child is 8+ and money skills are now on your radar, do not worry! A lot can be mastered in a couple of years. It just takes a little more effort and patience.

Seeing money visibly a in a jar conveys the way money works. Children will learn by adding coins you are saving for an item and how spending reduces the quantity of money in the jar.

Understanding the difference between needs and wants – this understanding will happen closer to 5 years old. Children are smart and they can easily learn and know what they need to survive and what they want. Tip – being a good role model in your own purchasing patterns will influence what your child believes is a need or a want.

Primary school kids 5-9 (building habits to last a lifetime)

When children reach school age, introduce more practical examples by connecting household jobs they do with money as the reward.

This is the age to introduce budgeting (spending less than you earn). This important skill can be taught through a pocket money system (earning money in exchange for work/chores) and a savings account or moneybox. It’s very important children learn not all the money they earn is for spending and other important habits like making a list before shopping and looking for the best price.

Learning a deserving mentality – this is taught by teaching children you earn money by working or having your own business. Introduce a pocket money/reward/allowance system and discuss roles and responsibilities, create a system that works for your family and remember to pay consistently and make a % go to saving and giving. Giving is saving for gifting or charity.

Delayed Gratification is taught by learning to save money and purchase something of higher value and meaning at a later date. Saving % for long term and not spending any until a later date e.g. to purchase a first car or put a deposit on your first home is when the fruits of delayed gratification are realised. Delayed gratification also allows for a change of heart. When children are saving to pay for something themselves they have the grace of time to change their mind and save for something that is more meaningful and special.

Opportunity Cost is also linked to delayed gratification. This is the cost forgone to purchase something else. e.g if you take your drinks and snacks to the movie theatre from home, the money saved from purchasing at the movies can go towards savings for a family holiday or for a bigger ticket item on the child’s wish list.

Entrepreneurial Mindset– teach children extra money can be earned selling unused toys or making food or products to sell in the community or to family and friends.

Primary School kids 10-12 (nurturing the foundations)

Children from 10-12 can work on all of the above and focus on:

Making wise choices – having a pocket money system in place gives children the opportunity to make mistakes and learn from them. You can ask your child “do you think that purchase was worth the money” or “would you buy that again?” At this age children are capable of making a decision between multiple options and planning what they are saving for.

HOW IS DIGITAL BANKING AND PLASTIC CARDS/ONLINE SHOPPING AFFECTING FINANCIAL EDUCATION?

Shopping and banking has evolved and will continue to do so. It can be hard for children to understand what they can’t see. When there is no exchange of physical cash it makes it easy for children to miss learning about the real value of money. There are still many opportunities to have teachable moments when cash is involved and a cashless society is not going to happen in the near future.

Here are some tips to use online shopping as learning opportunities for your children and how you can use online shopping to your advantage.

  • Use the Internet to search for best prices. A young child can help with this task.
  • Talk about an item you need and are saving for. Delayed gratification can still be learned even if the item is purchased online.
  • Save on parking fees and temptations at shopping centres – taking your kids grocery shopping can easily add $$ to the bill. Shopping centres tempt us with cafes and delights. It’s sometimes hard not to resist a coffee or fruit juice if you are doing the weekly shop. These expenses are all saved if you shop for groceries online.
  • Teach your child to do the online grocery shopping. You can include this as part of pocket money and teach them to book shopping delivery in 48hours. This allows you to check the order and make any last minute adjustments.
  • Always take advantage of free returns with online shopping. If the item is not suitable return it as soon as possible. Don’t waste money on items that are not what you expected.
  • Refrain from random online shopping with your children present.

If you have tips to share or questions relating to this article please leave a comment below or email jenniferelliott@smayver.com