Learning about finances, is an important life skill for children. In today’s world introducing children to real, tangible notes and coins is even more important since more-and-more the transaction of goods and services for payment is an electronic, with just a “tap” of a card, watch or phone.
By teaching children about finances from an early age, children can be assisted in becoming a financially responsible young adult and better able to manage their impulse spending, to set financial limits for themselves, and how to plan and follow a budget. Once children are attending primary school, they are starting to learn the basic math skills required to understand the arithmetic needed for money management, and some basic financial decision making (e.g., which shoes are more or less expensive). Early financial literacy can be introduced through sharing certain topics of conversations about money – as much as you’re comfortable with - for example, the cost of supermarket items, or through the use of an allowance.
The use of an allowance is one of the most common ways to start to introduce children to responsible spending. The amount of allowance provided is up to each family, but an important element of being given an allowance is understanding what needs to be done to earn the allowance. An allowance differs from receiving money as a gift, rather it can be viewed as a home-based “paycheck”. Just as expectations are outlined for school or work duties, home-based chores, or academic achievement. This can be clearly outlined by using chore or reward-based charts, for example, making a bed each morning, or unpacking the dishwasher.
Role-modelling responsible spending
Just as it is important to role-model healthy mental health coping strategies, children will also look to their parents for their understanding of money management. For instance, setting a budget or writing a shopping list and then sticking to it, or how to save for a big family-based goal like a holiday. When parents show that they are able to set limits and abide them, setting limits becomes a part of family life for a whole range of behaviours and also highlights this as an indicator of increasing maturity. Although, at the end of the day one of the hardest parts of growing up and being a parent, is that children also need to express themselves, and make mistakes. This also includes spending money and allowing children to learn from certain behaviours (like impulsive behaviours and spending habits) and learning from those consequences.
If you are looking for more helpful information for families and teaching financial literacy to children, the Australian Government has a website MoneySmart that includes more helpful tips and also budget planner for children.