Despite what some children may think, money doesn’t come from a hole in the wall or from the supermarket. A Commonwealth Bank study in December 2014 found that less than one in 10 (8%) of parents feel their child fully understands the value of digital money and a further one in three (35%) children don’t understand how digital purchases are paid for. Sadly money is real, it has to be earned, it pays for the roof over your head, food and clothing – and, if you’re lucky, there’s some left over to put towards savings.
One of the quickest ways to teach kids the value of money is to give them regular pocket money and help them open a junior banking account. Teaching them banking language is important – deposit, savings, balance, withdrawal, interest – the terminology and meaning are often a whole new world to them. The Comonwealth Bank study also found that children typically begin receiving pocket money at age six – and Australian children already appear to be savings-conscious with almost half (47%) saving all their pocket money each week
Grant them control over their money
Having the appropriate banking account also underpins a child’s budgeting skills whereby pocket money can be allocated towards different goals. The eventual purchase of these goals, be it a toy or game etc, acts as a great incentive for the child to keep going. Giving kids the power to control their spending and track money going in and out of their account will help build healthy financial habits. It also more clearly illustrates the different between ‘want’ and ‘need’.
The social aspect of junior banking can’t be underestimated either. Taking your child into the bank with you to learn the deposit or withdrawal process using a teller helps make the experience ‘real’. The same can be said of school banking where saving is a social activity that the whole class takes part in on a particular day every week.
Better off than Mum and Dad!
Banks attract youngsters to their junior accounts with interest rates that are often higher than what their parents have for their own accounts.
Junior accounts have a maximum age restriction (usually under 12), so it’s good for kids to make the most of these higher rates while they can!
Understandably, junior interest rates are higher because children tend to have less money in their accounts and therefore interest earned will generally be at a lower level.
But still, when you compare interest rates between the junior and the adult equivalent, there can be a big difference! For example, Cairns Penny’s lucrative 4.3% rate for the First Penny Saver account beats the adult alternative, the 0% Internet Saver account (at time of writing), hands down.