How to Teach Your Children About Money and Finance
Teaching children about money and finance is a crucial life skill that can set them up for financial success in the future. With the increasing complexity of financial products and the importance of financial literacy, it’s essential to start educating children from a young age. Here’s a guide on how to effectively teach your children about money and finance, with insights tailored for the local market.
The Importance of Financial Literacy
Financial literacy equips children with the knowledge and skills to make informed financial decisions. It helps them understand the value of money, the importance of saving, and the basics of budgeting and investing. According to Fisher Funds, financial literacy has not been consistently taught in schools, making it vital for parents to take an active role in their children’s financial education.
Strategies for Teaching Financial Literacy
1. Start with the Basics
Begin by introducing your children to the concept of money and its uses. Use play-based learning methods, such as playing shops with toy money, to teach them how money is exchanged for goods and services. This hands-on approach can help young children grasp the basics of financial transactions.
2. Use Online Resources and Games
Several online programmes are designed to teach children about money in an engaging way. MoneyTime, for example, is an interactive financial literacy programme for children aged 10-14 that covers a wide range of personal finance topics through self-taught modules and quizzes. Such resources make learning about money fun and accessible.
3. Involve Them in Household Budgeting
Include your children in family budgeting activities to teach them about managing finances. Ask them to help prepare grocery lists, set budgets, and track spending during shopping trips. This practical experience can help them understand the importance of budgeting and making informed spending decisions.
4. Teach the Value of Saving
Encourage your children to save a portion of their pocket money for future goals. Introduce them to the concept of delayed gratification by setting savings goals for items they want to purchase. This practice helps instil the habit of saving and planning for the future.
5. Open a Savings Account
Consider opening a savings account or KiwiSaver account for your children. This can teach them about the benefits of saving and investing over the long term. Discuss the purpose of these accounts and how they can be used for significant future expenses, such as education or a first home deposit.
6. Discuss the Dangers of Debt
Educate your children about credit and debt, explaining how borrowing works and the importance of repaying loans on time. Use real-life examples to illustrate the consequences of accumulating debt and the importance of maintaining a good credit score.
Utilising School Programmes
Many schools offer financial literacy programmes that can complement your efforts at home. Programmes like ASB’s GetWise and Banqer provide workshops and resources for various age groups, teaching essential money management skills. Encourage your child’s school to participate in these programmes if they are not already doing so.
Teaching your children about money and finance is an ongoing process that requires patience and creativity. By starting with the basics, using engaging resources, and involving them in real-life financial decisions, you can equip your children with the skills they need to manage their finances effectively. With a strong foundation in financial literacy, they will be better prepared to navigate the complexities of the financial world and achieve their long-term financial goals.