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Teaching Children Finance – an Overview

Teaching children finance is different for different aged kids. Here is a summary of what you should teach your kids and when.

What to teach your child

Children's Age

Pre-schoolers and Little Kids

Money definitions

Teach your child what money is by showing them different denominations and currencies.

Tweens need to know about budgets, goals, savings plans and debt.

Teach teenagers the full range of money terminology and how this can be applied to their finances.

The Value of Money

Teach your child the value of money in terms of material goods. For example, at the supermarket explain how the shopping costs money.

As your child gets older, you can explain the importance of money for everyday life (house, car, school, holidays) and as security for the future.

Money isn’t all about value in terms of goods and services. When your child reaches this age, you can start discussing concepts of value in terms of investment and superannuation.

How Money is earned

We can teach that adults get paid money for work or effort. Children can learn this for themselves if you pay them a small allowance.

A career choice may be appealing or rewarding, irrespective of how much is earned.

Explore the relationship between time and money, and how different careers demand different rates of pay.

Entrepeneurship

Teach your child that if they do extra chores, they can get an extra reward.

Help your tween find odd-jobs outside the home to give them an understanding of how business works.

Help your teenager find a job and learn entrepreneurial skills by applying their skills to their job.

Saving Money

Saving for short-term goals. Money should be "saved" in a visible location (e.g. jar or money box), so your child can see how their savings are growing.

Saving for longer term purchasing goals. You can help develop a savings plan in order to make a purchase or simply to reach a set target.

Rather than saving for a specific purchase, we can encourage a routine deduction from wages or pocket money.

Spending Money

The most important lesson about spending is that once money is spent, it is gone for good. So it’s important to only spend money on things you need or really want.

Comparing price and quality. Evaluating purchase decisions, making a sacrifice on one purchase to fund another and prioritising expenditure.

Prioritising expenditure within a finite budget. This is a good opportunity to plan for future expenses such as holiday spending or buying Christmas presents.

Borrowing Money

What is borrowed must be paid back. Use examples of borrowing toys from friends and how they must be returned.

You may wish to introduce concepts of interest and calculations of time to repay loans. The maths your child is learning at school could be put into practice.

Learning the difference between depreciating assets (e.g. car) and appreciating assets (e.g. home) is a great way to help your child.

Investing Money

Explain the concept of using money to create money. For example, by putting money into a savings account, you can earn interest.

Discuss share ownership and possibly purchase shares in a company. You can then track share performance together.

Take this opportunity to talk about the concept of managed funds and how people 'pool' their money together to maximise returns. This could also be a good time to discuss risk when investing.

Risk and dangers in finance

Introduce the concept of risk. If you have something, there is always a chance you’ll lose it.

Introduce the risk of debt, scams, impulse buying and credit cards.

All financial transactions and investments have a level of risk – discuss the concept of low and high risk, and that investments with a promise of a good return are usually high risk.

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We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.


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