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“Children are like sponges and absorb how we speak about money and how we engage with money from an early age,” says Charman.
“I’ve found that primary school children who have some basic adding and subtracting skills really enjoy working on their goals to save for specific items.”
Here are some of her tips for finance professionals seeking to assist parents in drumming key money messages into children.
Teach children how money works
The most important message, says Charman, is the need to work to receive money.
If pocket money is linked to chores, children will appreciate that they get rewarded for effort. However, Charman advises parents to steer clear of giving out money for basic expectations such as keeping their room clean and tidy. She reasons that nobody will pay them for such tasks when they are older – so why do it now?
Second, children must learn to make decisions about what to do with that cash – how much they should save (and later invest), and how much they should spend.
Encourage families to budget together
Parents are powerful role models when it comes to financial literacy. But as well as being conscious about what messages your own behaviour is sending, you can also set up specific learning exercises.
“Track what you spend for a week,” suggests Charman. “Put up a whiteboard and, for every person in the family, write up what they’ve spent during the week. Set a budget and try to keep within the budget.”
Also, she suggests explaining to tweens and teenagers how to read a bill. “The mobile phone bill is probably the most relevant. But electricity is also a good one, as they’ll need to pay it when they move out of home.”
Explain the dangers of a cashless society
In the past, parents used cash for many transactions. Children could see the money being spent, and how much was left over. “Now it’s not so clear,” says Charman.
“You don’t see the money come out of your bank account when you pay with tap-and-go or other similar payment options - and neither do your children.”
Charman calls on all professional advisers and parents to teach children about delayed gratification.
“In today’s society, we are not used to waiting. We binge-watch our favourite TV series, we put desirable new shoes on the credit card. But we’ve forgotten the immense pleasure you get from an item if you save for it slowly and finally have enough to buy it.
“When you buy something your child wants, think about whether you’ve missed an opportunity to teach them a new skill: setting a money goal and achieving it.”
Set up a bank account
Your child can have a bank account in his or her own name after the age of 14, notes Charman, along with a debit card. Encourage children to deposit pocket money, or cash gifts, into the account, and withdraw as needed.
Open the door to investment
Teaching children about investing can have two significant benefits: they may better understand their parents’ financial decision-making and it may set them up to make informed financial decisions later in life.
Financial advisers can assist parents or grandparents to become the trustee of an investment account or even a managed fund on behalf of a child or children.
“Money is a function of how we move in society,” says Charman. “The lessons we teach children in their younger years will set them up for success.”
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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Dianne Charman is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Dianne Charman does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties their products, services and material. Past performance is no guarantee of future performance.