Bessie Hassan | Money expert at finder.com.au

With the lack of education about personal finance these days, it’s up to parents to teach their kids the value of a dollar. In a world where more and more transactions are taking place digitally, it becomes harder to explain money management without it being confusing or just plain boring for your kids.

However, by keeping it simple and speaking their language, you can set your little ones up for greater financial security. Here are four ways you can teach your kids about good money habits.

1. Make smart money decisions

There are many finance-related decisions and experiences that you can share with your kids to help them understand the value of money. For instance, explaining how you compare different prices at the supermarket and letting your kids find some of the items on your grocery list is an easy way to get them started (and it can cut down the time you spend shopping!).

While you’re at the grocery store, let your kids hand the money to the cashier. You can also get them to count the change to make sure everything adds up. Hopefully, they’ll feel confident enough to do this alone at the school canteen as well.

2. Let them earn pocket money

Giving your kids pocket money is one of the best ways to teach them financial independence. Though you may not want them to slave away doing household chores, you also don’t want them thinking that money grows on trees. Research from finder.com.au has found that 58% of parents who had to work for their pocket money are now giving their kids free handouts.

Each family will have different strategies in regards to how much each chore is worth. To keep your kids motivated to earn more pocket money, help them set a savings goal, whether it be a dollar value or a specific item like a new toy or gadget.

3. Teach them about physical vs digital money

Starting off by giving your kids physical money will help them understand the physical worth of money. However, you do have to explain the concept of digital money too. For instance, you could show them an Internet bill and explain how long you have to work to earn enough money to pay the bill. This helps them become more aware of their everyday actions by understanding the value of work and money.

Along the same lines, equipping your kids with online resources will definitely help them as they grow up in the digital world. This could involve using an online calculator to help them budget for their goals or using a finance app such as Raiz to teach them about the power of long-term investing and compound interest through Little Raiz.

4. Show them the consequences of being financially irresponsible

Despite all these different lessons, sometimes it’s impossible to prevent your kids from getting into trouble as a teen. It’s important to help them out but not to pay off any of their debt for them.

They might have to work extra hard to pay of their debt by doing extra shifts at the local cafe or saying “no” to a new video game. Showing your child that there are consequences to being financially irresponsible will set them up for a better future. It’s better for your kids to learn this when they’re younger rather than ending up thousands of dollars in debt as a young adult.

—

Talking to your kids about money doesn’t always have to be a burden. With simple lessons and by allowing them to get involved with the family finances, your kids will be feel more enthusiastic and prepared when managing their own money both now and well into the future.

Important Information

The information on this website is general advice only.  This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.  

Past return performance of the Raiz product should not be relied on for making a decision to invest in Raiz and is not a good predictor of future performance.