Kids are never too young to save

10 July 2015

Teaching your children healthy financial habits ought to form a big part of their overall education. This is increasingly evident, given the world of complicated and ever-changing financial dealings they will be growing up in. A head start when they are young will certainly pay dividends later on.


Getting ahead

The earlier you can teach a child about saving and spending money responsibly, the better prepared he or she will be to manage their own money.

This starts with teaching a young child how to count coins, how to calculate change, how to use a savings account, and how to save for a particular goal. Basically, kids can be divided into two groups, requiring very different money education.

  • The under 12s need a solid grounding in saving money,
  • while the older kids, from 12 to 17, tend to use their money a lot more and thus will benefit from a good knowledge of transacting practices.


Finance lessons at home

Money education starts at home, with kids observing how their parents go about their money-orientated lives; paying the bills, filing tax returns and shopping.

Through these routine tasks, younger kids can sometimes develop illusions and misconceptions regarding money (e.g. ATMs give out free cash, credit cards make everything free) and so it is important to correct these and remind them that money is hard-earned. A recent Commonwealth Bank survey of kids? financial attitudes found the following, sometimes quite funny, beliefs:

  • You can use a plastic card to get free money from a machine in the wall (40% of 5 year olds)
  • You don?t have to pay money to watch movies on your parents? tablets or smartphone (61% of six year olds);
  • There’s someone behind a wall who gives your parents money when they put their plastic card in a cash machine (33% of five year olds); and
  • You don’t have to pay money when you buy something like a toy or computer game on a computer (18% of seven year olds).

This is increasingly important considering the age of “invisible money” we?re living in where kids don?t see people buying items with physical cash as much.

One of the most important lessons you can teach your kids…One of the most important lessons you can teach your kids…


Money teaching tips

Care must be taken when explaining the concept of money to children because teaching them the wrong way might foster bad money beliefs or not teach them anything at all.

Speak frankly about money

You don?t want your kids growing up thinking that money is the solution to making friends, conquering enemies and discovering happiness. In a study published in the Journal of Economic Psychology, a group of Polish researchers found that if kids only think of money in a symbolic sense, they can act selfishly in the short term and in the long term they may attach too much psychological weight to it. This can lead to struggles in developing the close personal relationships with other people that are essential for coping with the emotional problems that money doesn?t solve. So, talk about money with them in a rational sense.

Explain as you go

Some parents and teachers believe a one hour crash course in money habits is sufficient for their kids. Too much information in one go would struggle to sink in, and the useful lessons would probably wear off within a few months. ?In-the-moment? explanations are much better. For example, explaining budgeting whilst shopping for groceries with kids is a very practical way for them to learn how to shop.

Another ?in-the-moment? example is sitting down with your child at a computer to compare savings accounts for where the birthday money from Grandma can go. This way, it?s also easier to teach the concept of interest whilst comparing interest rates of the different youth savings accounts.

Finance in the classroom

Many schools have finance workshops and practical money lessons in place for children of all ages.

Popular programs include:

What can kids teach adults about money?


Ask your child?s school about their finance programs.


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