Saturday, September 4, 2010

Money doesn’t grow on trees

Help your children become financially literate for life
Recently I was playing “shops” with my daughter, who has a small toy cash register and plastic money, and had neatly set up a grocery store with plastic fruit and vegetables.
I selected my items and she “scanned” each piece, and then announced that the total came to $565.
I promptly handed over some plastic coins, she placed them in the register and then handed me back more coins than what I gave her.
“Here you go,” she said. “Thanks for shopping!”
Now her understanding of money is very basic, as she is only four years old, but she has certainly picked up on the fact that many times when we are out shopping, we not only get what we have gone in to buy, but we also get a handful of cash.
Parents understand that getting cash out at the checkout is a good idea to save on bank fees but this transaction doesn’t help to teach our children about money.
So it’s important for parents to talk to their kids and explain why they do these things and that the money you are given is actually coming out of your bank account, it’s not just a nice little bonus to say “thanks for shopping with us” (though wouldn’t that be nice!).
Parents are probably the biggest influence on how we deal with money, even if we decide not to do what our parents did.
If you set a good example for your children by following good, basic money management habits yourself, and reinforcing the lessons your kids are taught in school, then your children will be better with money too.

Financial literacy is an important life skill so here are some tips from the Government’s Understanding Money website. 
1. Start early by talking to your children about money and helping them establish good habits from an early age.
2. Show kids the value of money by explaining what $2 can, and cannot, buy.
3. Let them watch you pay for things and allow them to hand over the money.
4. If you are giving pocket money, give a combination of notes and coins to help familiarise them with the different denominations.
5. Teach children how to compare prices and shop around.
6. Include kids in conversations about the family budget and bills.
7. Get your kids into the savings habit by helping them start a savings account. Help them work out their goals and how to reach them. Be realistic and make it fun, for example, get them to draw a picture of what they want to save up for.
8. Help children understand that money is a limited resource and that’s why it is important to budget. 
Pocket money can help teach kids about the basics of budgeting as well as how to prioritise their spending and saving.
When you give a child pocket money, make sure you are clear about what you expect from your children with the money. For example, is the money for treats of their choice, or tuckshop at school? Do they receive a set amount each week, or is it only payable if certain chores are done?
If your child has a mobile phone, use pre-paid cards and help your children work out how long they think it will last.
Get them to pay for the card themselves if they spend it too fast.
Encourage your children to keep their savings in a glass jar so that they can watch their money grow.
It’s important kids understand the difference between needs and wants, as well as deferred gratification. Having to wait until they can afford to buy something will help them to budget, to save and stop them getting into a cycle of debt.
Parents should also consider talking to children about being aware of marketing and advertising gimmicks.
Once at school, encourage your children to participate in school banking and get them interested in looking at bank statements, following how much money they are saving and thinking of a long term goal.
For teenagers, parents can help them set up their own bank account and use internet banking.
You can direct debit their pocket money into their account to help them get used to intangible payments and that electronic money isn’t just a bunch of numbers.
Make them responsible for their own bills, such as mobile phones, and try not to lend them money for unnecessary purchases such as a new t-shirt.
If you do lend them a large amount of money, reduce the amount of their pocket money until the amount is paid.
Some parents may consider charging board if their teenager has a part-time job as this will get them into the habit of paying their way for things like food and shelter. Just be sure to make the amount realistic to their income.
Explain to your children about receipts, tax, credit cards and the need to keep records, as well as fees we incur in daily life such as visits to the doctor or parking meters.
Highlight the fact that if they start now, they will be so much better off down the track. Remember, it takes money to create money.
Allow your children to make their own decisions and learn from their mistakes, but above all set a good example to them.


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