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How to teach your kids about money

There are so many things I want to teach my daughter but money smarts is very close to the top of my list.  It is an essential life skill and I am very aware that it is my responsibility to teach her.  Many parents feel the same way, and I often get asked “What is the best way to teach my child about money?”   The truth is, like with many things, there is no one correct way.  Each child is an individual and some ways will work well with some kids, but not with others.

I believe there are two essential elements you need to help your children learn about money: you need to talk to them about it and you need to show them about it.  The following are some practical ideas of how you can combine talking and showing, to give your children a solid real-world foundation in the art of handling their own finances.  Here are some ideas are roughly split by age group but some ideas span ages groups and some children might be ready for older concepts at a younger age.  It is an entirely individual process so take the ideas that suit you, your family and your beliefs about money.

3-5 years old

  • Buy them a money-box in which you put some spare change.  Take out the money do some basic counting.  Talk about the differences between the coins, shapes, numbers.   Once they are a bit older, introduce notes and discuss the differences between notes and coins.
  • Play shops.  My daughter loves this.  We even use loose coins from my wallet to “pay” for things.  I ask her how much things cost.  Mind you everything costs either $2 or $30 according to her!  We will work on some more realistic pricing when she is older 🙂
  • Explain why you, your partner or both of you, go to work.
  • Give them $2 or $5 to spend at the supermarket, so they can see how much they can purchase.  This used to be a lot more fun when lollies were 2c or 5c at the local Milk Bar!
  • Start to talk to them about the difference between the things they need and the things they want.
  • Start to talk about how much things cost, they are still very young and they won’t really understand it for a while but it helps to start the conversation.
  • Introduce the idea of pocket money when you think they are old enough to understand it.  You could set age appropriate tasks and have a chart to tick off when a task is done.
  • Help them to start thinking of saving for something they want to buy.  Get them to put aside some money in a jar or money-box to work towards their goal.
  • You are probably like me and you rarely visit a bank branch.  However, opening a bank account for each child and taking them to the bank to make deposits, is a great opportunity to explain to them how the bank works.  (Remember beware of the high tax rates on kids savings after certain thresholds.  Click here to find out more)
  • Start to talk about the ATM and where the money actually comes from, that it doesn’t just magically appear from a hole in the wall.

5-13 years old

  • Consider saving as a family for something fun like a visit to the zoo or local theme park.  Figure out together how much you need then create a plan to save for it.
  • Set up a business for a day such as a Lemonade Stand, or help them set up their own small business for family and friends such as dog walking, babysitting or lawn mowing.  This allows them to understand some of the mechanics of earning money in the real world.
  • Bring them to work for a day.  It gives them a better understanding of where the money actually comes from.
  • Have a garage sale or car boot sale, where your child sells a small number of items that they have chosen.  Help them to set the prices and then they decide what happens to the money once they have earned it.  Talk through their options in terms of spending versus saving.
  • Talk about purchasing items without cash, how items are paid for and where the actually money comes from.  Parents often use their cards so it is difficult for children to understand the relationship between physical money and putting a card in a machine.
  • Give children a set daily allowance for holiday spending and get them to figure out how much things cost, whether they can afford it and how much change they should expect.
  • Understanding the value of money – talk about making choices with your money, buying things on sale versus paying full price, spending versus saving, bringing your lunch from home versus buying take-away.
  • Get them to write a list of things that they need and things that they want.  Explain that sometimes you have to wait to get the things that you want and save for them.
  • Discuss ways to save money around the house such as turning off the lights or the heater.

13-18 years old

  • Once they are old enough encourage them to get a job part-time job or work over the summer holidays.  My husband dug graves and cleaned offices during his formative years and I worked in a library.  Having a job teaches you not only about money but more importantly about the politics of the work place, a critical life lesson and one I did not learn fast enough!
  • Give them a budget for them to cost and plan their own birthday party or major event.
  • Give them a budget to plan, cost and cook a family dinner.
  • Don’t restrict their spending.  My husband always tells me that the best money lesson he ever learnt was spending all his money on the spaceys (as they were known in those days) only to have to survive the rest of the week with no cash.  Let them make mistakes now.  It is much better now than later.
  • Sit them down and explain to them how to read a bill.  Explain to them about different payment options and that some bills are monthly, some quarterly etc.
  • Run them through the amounts of money involved in paying different household bills,  especially the hidden ones such as  insurance and electricity.  Let them know how much things cost, so they don’t get bill shock when they move out of home.
  • Tell them how much your mortgage repayments or rent is every month.
  • Explain how a credit card actually works.
  • Talk about mobile phone plans and how they actually work.

Last but not least, I believe absolutely the BEST way to teach your children about money is to be a good money role model yourself.  As they say actions speak louder than words, and we all know our children are sponges for everything that we say and do.  Let’s face it who hasn’t been shocked by something our child has said or done and thought to ourselves “where on earth did they learn that?”  Model the money behavior that you want your children to learn and you will be successful in creating a confident, financially savvy member of the next generation.

If you liked this post you might also like:

Why Money Is Just As Important As Sex (When Talking To Your Children)

5 Financial Tips You Need To Know Now You’re a Parent

How to Pay Off Your Mortgage Faster

Winter Family Meals On A Budget

Disclaimer: The information contained in this post is general in nature and does not constitute financial advice.  Please see your financial adviser for advice specific to your individual circumstances.

10/10/2013 32 comments
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find your lost superannuation.

Loads of people I speak to have lost superannuation.  Actually, I think most people do, you simply change jobs a few times and lose track.  Easily done.  Well, until recently one of those people was my husband.  Yes, my husband had superannuation that had been lost in the system from a job he had ten years ago!

I cannot tell you how much this irked me.  Finding your lost superannuation is the quickest and easiest way to boost your superannuation balance, and it helps keep you off cat food in retirement.  Having explained this to my husband, I started a campaign to get him to move his superannuation.  So year one, not wanting to be the nagging wife, I would gently remind him that he had a new job and that he should move his superannuation.  Nothing.  Year two, I stepped up the campaign a notch and I printed out the switch form a couple of times and left it next to his computer.  Nothing.  Year three, giving up on the idea of not wanting to be the nagging wife, I gave regular, not so subtle reminders to move his superannuation.  Still nothing.  Year four, sigh, I gave up my campaign.  Like they say you can lead a horse to water but you can’t make them drink.  Then about a month ago, out of nowhere, after reading one of my posts my husband declared he was going to find his super.  Hooray! I wasted no time and got him on to the computer and over to the ATO SuperSeeker site.

It was so easy and took very little time at all.  All he needed was his name, date of birth, tax file number and a previous notice from the tax department to register for online services.  (He just used last year’s tax assessment).  When he got on to his account and did a search for his lost superannuation there it was, waiting for him.  Just a few more clicks and he had transferred it to his current superannuation account.  A few weeks later, his current superannuation provider sent us a letter saying the money had been received.  Yay!  So simple.

However, you don’t just have to use SuperSeeker there are a couple of other ways to find your lost superannuation too.  A great way is to contact your current superannuation provider or check their website and get them to do it for you.  Most have a service to find your lost superannuation and they will also help you combine superannuation accounts.  Combining your accounts into one is a great strategy as it not only helps save on fees but it also makes your superannuation much easier to keep track of.  Over the long term, fees eat into your retirement savings.  Also you can click here to contact AUSfund, they look after the lost super of many Australians for some of the biggest super funds in Australia.  They can tell you if they have any of your lost superannuation.

So, don’t wait ten years like my husband did, click here to go to the ATO’s SuperSeeker site and find your lost superannuation today.

If you liked this post you might also like to read the following:

How To Boost Your Superannuation Balance For Free!

How To Boost Your Superannuation Balance While You Are A Stay At Home Mum

Your Superannuation And Your Children: One Thing You Really Should Know

Women And Superannuation: How Do You Make Sure You Have Enough?

* Please note this is for your general information only and does not constitute financial advice.  Please see a financial planner or accountant to get advice specific to your individual needs.

24/09/2013 12 comments
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