It's never too early to start teaching children about money. Children can learn how to save coins in a piggy bank before they understand how to count the right change.
Even pre-schoolers can learn the value of money and saving for small goals. Try showing them how much $2 or $5 can buy in the supermarket. Talk to them about the difference between the things they need and the things they want. Teach them to manage their spending money.
People approach spending money in a variety of ways. What suits one family may not suit another. When deciding on what suits your situation think about spending money as a tool to teach your kids about money.
If you're keen to teach your kids good habits and concepts about money, you should probably link spending money to financial concepts - such as saving money, spending money, and making your money grow, rather than linking it to things that have nothing directly to do with money, like:
- Behaviour and emotions.
- Family responsibilities - your child’s participation in routine household chores which are part of being a family member.
- School work and out of school activities.
How much spending money?
Some parents give their child a dollar for every year of their age, i.e. a five –year old gets $5 spending money weekly. But do what you feel comfortable with and can afford.
Spending Money Timetable
Once you’ve agreed on an allowance or on the amount of spending money, make sure you pay it on time, every time. Kids need to know how much they’ve got coming in so they can budget.
Make it easy for a child to relate to the concepts you're trying to teach. For example, if you want your young children to get into the habit of putting aside an amount for short term saving, long term saving, spending, and charity:
- Give your child an amount that can easily be divided into four like 4 x 50c.
- Give them physical reminders of how they are dividing up their ‘income,’ with four marked containers for their money. That way they can easily see how they're doing.
Find out what your children want. Help them think about ways to earn money to save for the item: toys and games if they are young; or books, movies or a special event if they are older.
Discuss how much they will need to set aside from their spending money or their pay each week to reach their target. Encourage your children to stay on track by offering to add to their savings if they achieve a particular savings goal. Get started by using our calculator.
If your child's first savings experience is good, they will be more likely to repeat it!
Saving for a rainy day
Encourage children to put loose change in a clear 'savings jar' each day so they can see it grow or use the cash to pay for small items like school lunches.
Open a bank account for each child. Some banks offer savings accounts for children that don't charge fees and offer higher interest rates than regular accounts.
Take your children to the bank or ATM where they can make their own deposits. This will make them feel responsible for their own savings.
Consider saving as a family for something fun like a holiday, a new television or Wii. This is an opportunity for parents to demonstrate good money management. It's also a way to naturally introduce finance topics at the dinner table. You can work on a joint fundraising project, pool your money and build the family savings.