As parents, we want the best for our kids. We want them to find true happiness, joy and meaning in their lives.
We also want them to be financially secure.
Teaching your children smart money habits is one of the best ways to set them up for a stable financial future.
Introducing concepts like saving, budgeting, and investing early, can help develop and nurture financial confidence that can see them through all stages of life.
Just like learning to swim or ride a bike – it’s never too late to learn!
What’s the key to making these financial literacy lessons stick?
Like all learnings in life, it needs to be age-appropriate and relevant. Otherwise, you’re at risk of not getting the cut-through you are looking for.
It will be discarded like an empty chip packet.
So we thought we’d compile some age-appropriate strategies to start teaching your children the basics of financial literacy.
Under 11 years
This is where you introduce the basics of money, how it works, how it’s used and how they can manage it.
As rewards for good behaviour work well with kids, we recommend implementing a rewards-based system for their money management.
You’ll see this strategy pop up regularly for this age group – it’s true, tried and tested.
If your child receives weekly pocket money, divide their earnings into three categories:
- spend – for a toy or treat
- save – for something bigger like a bike or skateboard
- give – donating to those less fortunate
Set up 3 physical jars so your child can physically see the money in each jar.
Each week, provide opportunities for your child to earn money through good behaviour, chores or homework. At the end of the week, count the money in each jar and discuss what each category represents and how it can be used.
The amount in each jar is set and cannot be traded between jars if they run out – they cannot steal from the giving jar to buy an ice block on a hot day.
Hot tip!
When explaining saving to your child, explain how saving is equivalent to paying yourself in the future.
This is an easy way for them to understand the concept and benefits of saving. With the physical jars, they will also see the amount in each jar increase as the weeks go on, showing how money, when managed well, can grow.
Reinforce these concepts regularly, especially when they receive gifts in the form of money such as on their birthdays, Christmas or special occasions.
Preteen – teen era (Ages 12–18)
A tricky time at best, so let’s keep the money message simple.
As your child navigates their pre-teen and teenage years, they crave more independence. As a consequence, independence requires some form of funding!
Use their interests and desire for independence to fuel their motivation for successful money management.
If your child likes to keep up with the latest fashion – use saving for clothes to keep them engaged.
Parents of gamers will rejoice to hear there is a valuable financial lesson that can be learned through gaming.
Many teens enjoy games that require strategy. These same tactics used in gaming strategy can be used as an analogy for investing (stay with us).
Much like a game, investing requires understanding different ‘players’. Your players in investing are stocks, bonds and cash. Your kids can learn how different players work together to form a solid financial strategy.
Depending on your child’s interest level (this part may be challenging), you can introduce the concept of building a model investment portfolio, showing how different types of assets can balance risk and reward.
Online investment simulators are another great tool. They allow you and your child to experiment with virtual investments, investing in various stocks and tracking their performance over time.
This is a great way to prepare them for what real investing is like when they do the same with real money.
Young Adults (18+)
For young adults, it’s time to dive deeper into money management.
Start with goals-based investing.
What are their financial goals?
Is it saving for a car or a house deposit?
Discuss timeframes – how soon do they want to achieve these goals?
The longer they have to save, the more potential they have for growing their wealth through investing.
If you have children entering university study, this is a good time to bring up the value of budgeting and balancing student loans with part-time work.
Sit together to create a budget to help them track expenses and understand the importance of managing money.
Hot tip!
Link their financial goals to a specific time frame, and talk about how different investment strategies may work better depending on how long they have to reach their goals.
This will help them understand the concept of time horizon in investing and how it influences decisions.
Final Thoughts
Teaching your children about money at every stage of life doesn’t just build their financial literacy; it sets them up for success in adulthood.
Whether it’s teaching your young child how to save, helping your teen understand investing, or guiding your young adult in managing student debt, these lessons will give them the tools to make sound financial decisions.
Abide by the 1,2,3 guide you’ll be helping your children prepare for a financially secure life.
- start early
- stay consistent
- make the lessons engaging
Your children will be the thankful beneficiaries.