Children are never too young to learn effective money habits. Habits acquired early in life tend to be the habits that are retained for life. Guidance in appropriate money management helps to teach children about the positive and negative meanings of money and what thoughts and feelings go into making money decisions. As in all parenting decisions, a consistent approach to encouraging good money habits is essential.

As a family:

• Be open to discussion about money issues
• Include children in discussions about family values and attitudes to money
• Decide on the type of guidance and advice you will give, bearing in mind that every child’s personality and learning style differs
• Set limits and consequences for spending
• Allow children to make their own decisions and learn from their mistakes
• Decide how your children will receive money: pocket money; allowances; one-off gifts (birthdays etc.)
• Consider the developmental stage (as opposed to chronological age) of your child when deciding on how much pocket money to provide and the criteria for increasing the amount
• Be clear about household chores you expect children to do that will incur no payment
• Teach by example

Teaching money concepts

Earning:

• Teaches children reward for effort
• Gives a child a measure of financial independence
• Has the potential to build particular skills
• Provides recognition, acknowledgement and a sense of freedom
• Demonstrates expectations and work standards

Spending:

• Teaches children how to keep account of earnings vs spending
• Provides opportunities to select and compare (quality, quantity, price)
• Helps clarify difference between wants and needs
• Encourages children to take responsibility for their own decisions

Saving:

• Is a means of children acquiring what they want or need
• Helps to establish a regular pattern of putting money aside either for planned purchases or for emergencies
• Teaches the concept of delayed gratification
• Helps children look at the bigger financial picture of working towards a goal rather than frittering away their regular income

Borrowing:

• Teaches children that whatever is borrowed must be paid back
• Provides opportunities for children to learn about the costs of borrowing (interest, lay-by, the concept of credit and contracts)
• Provides the opportunity for children to make value judgements about whether to borrow or save for special purchases

Sharing:

• Encourages notions of giving and helping others
• Is an experience in doing something for no financial reward or public recognition
• Illustrates that the contribution of time, skills and energy can be as important as any financial gift

Suggested activities:

• If possible, take your child to your workplace so that they can see how and where you earn money to pay for things like food, petrol, clothes etc.
• Whenever you visit doctors, dentists or other professionals, take the opportunity to explain about fee for service and financial planning for emergencies.
• Set regular, unpaid chores so children are part of a functioning household routine.
• Encourage children to keep their savings in a glass jar (rather than a closed box) so that they can watch their money grow.
• Provide opportunities for children to handle real money - talk about the different coins, sizes, colours and values.
• Help them to set up shop with play money, a toy cash register, account books etc.
• Wherever possible, let children insert money and collect change (public transport, admission tickets, tokens).
• Next time you rent a video, encourage your child to take responsibility for its rental and return.
• Ask at your local library for appropriate story books that feature themes on earning, spending, borrowing, saving etc.
• Ask your financial institution if they distribute any publications appropriate for children
• ‘Monopoly’ is a great board game for the whole family. Encourage younger children, who may not understand the rules, to help be banker and count out money.
• Encourage a realistic approach to spending by taking children window shopping to compare price, value, quality.
• When bills arrive, explain to children that things like water and heating cost money.
• Explain about receipts, how a credit card works, and the need to keep records.
• Help your child set up an account with a financial institution. Children learn from observation and example: the most effective teaching is adult role modelling and the practise of good money habits on the homefront.