By Mandy Porter
Talking about money is high up on the list. Doing so in a calm, relaxed way and making use of everyday opportunities to demonstrate healthy financial habits is important. From a young age children witness how their parents interact with money, so demonstrating the value of money is vital.
Pay cash, not card
One way of demonstrating that money has value is to pay with cash when your children are around. Paying with a credit card sends the message that anything is available just by swiping a magic piece of plastic. Have a conversation about items that you consider essential versus luxury or just-for-fun items. Explain that it is not good to spend more money than you earn and that if you want something, you need to save for it.
Allowances provide practice for money management
One of the best tools for teaching children money management is pocket money or an allowance. Experts differ on the age which this can start, but it is generally accepted that six is a good age. Start off with a weekly allowance for young kids and increase this to a monthly allowance for teenagers so that they can be challenged to make their money last. Tie the granting of an allowance into basic household chores, so that your child understands that you have to work for money, it does not simply get handed out. Talk to your children about what types of expenses you cover – electricity, food, house, and car – and explain how they might spend their own personal allowance.
A good tip is to divide the allowance or cash birthday presents into a portion that can be spent immediately, with the rest being put away for the future.
Keep teaching
As your kids grow older, explain new concepts to them such as borrowing, interest and investing, using real-life scenarios. For instance, if you go overseas, use this as an opportunity to teach your pre-teens and teenagers about the exchange rate and different currencies.
Living a financially smart life is something that should be inculcated from a young age, while at the same time we are never too old to change our own money habits.
(Source: Moneyweb. Article by Mandy Porter - a certified financial planner at Alexander Forbes. Image: Shutterstock)
