Teaching your children money management skills can help them prepare for future financial challenges as they become independent adults in New Zealand. You should start teaching them from an early age to ensure they can recognise different amounts of money and count it accurately. And as your children get older, giving them pocket money and taking trips to the shops or bank can teach them how to save for the short and long-term, as well as how to spend their money wisely.
Teaching your children how to budget, spend, and save will create good money habits for life. So without further ado, here are 10 tips for teaching your children about money management.
1. Use jars to save money
Have your child draw pictures of the item they’re saving for on jars. Also help them understand that some items will take longer to save for. For example, the short-term savings jar could have a drawing of a certain toy, whereas the long-term jar could have a drawing of a trip to the beach. Have your child set aside money for both short-term and long-term goals, and use another jar where they can put in some spending money.
2. Create a savings goal chart
Once you know what your child wants to get, determine how long it will take to save for it and draw up a chart. Use a box to represent each week, and have your child put a sticker in that box after they’ve set aside the allowance from that week.
3. Give your child rewards for saving money
Reward your child for saving their money. For example, if they don’t spend money for a specific amount of time, give them a small reward or treat. If your child saves for a longer period of time, you can give them stickers, toys, an additional half an hour playing video games, or anything else that motivates your child. This teaches them that proper saving can come with great rewards.
4. Lead by example
Let your child see that you can also save your own money. Put some money in a jar as your child watches, and tell them it’s your savings jar. This’ll show them that saving is a good habit to follow. What’s more, seeing you save gives your child lessons that’ll further inspire them to save their money.
5. Play money games
Playing Monopoly or The Game of Life can teach your child money management skills, especially about how important it is to plan ahead. There are also several online games related to money that you and your child can play together, like Rich Kid Smart Kid. Moreover, you can play pretend store or restaurant and help your child understand the process of spending money and having to save again if they wish to make a purchase in the future.
6. Open a high-interest savings account
Help your child understand the concept of interest by looking for a savings account that earns interest. Consider opening a high-interest online savings account with your child, and tell them about the importance of compound interest – the sooner they save, the faster their money can grow from compound interest.
7. Help your child set priorities
Have your child write out a list of things they want to purchase, and prioritise that list. Also tell them to think long term. They may want to buy a laptop for college, take a graduation trip around the world, or even save for a deposit for a house. Then, get your child to set aside a certain amount of their pocket money for each goal. This type of financial plan and thinking will serve them well in the years ahead.
8. Allow your child to make mistakes
Let your child spend their pocket money on something they want. If they realise they don’t have enough change left to get the video game they really want, they’ll wish they’d thought about it first before spending money on the first item they bought. This can teach them to save up for the things they really want, and to consider carefully before they spend.
9. Talk to your child about money
You should talk to your child about your income, as well as your financial and retirement plans. This will help them understand that saving is a long-term commitment and is necessary to obtain and pay for the things that you both want and need in your life.
10. Look for better deals
If your child sees a book they want at the bookstore, tell them to look online for a cheaper price. Together you can compare prices on different websites and, who knows, you may consider that buying a used book is the better option. When grocery shopping, teach your child the importance of creating a shopping list, comparing generic/store brands and name brands, buying in bulk, and considering what they need versus what they want.
Raising financially-savvy kids
If you follow these tips and raise financially-savvy kids, they’ll make better decisions with their money throughout their lives. You can also teach your children how to apply for a loan and pay it back the right way with your choice of loans from Admiral Finance – we’re a leading and trusted online source for obtaining finance in New Zealand. Your children could use the funds to buy a new laptop for school and then use their allowance to pay back the loan. With your guidance, managing money can be both fun and rewarding.