Attitudes towards money are often shaped during childhood and will have a lasting impact, defining financial behaviours well into adulthood. Sometimes, this is copying behaviours, whether positive or negative, and in some cases, it’s rebelling and doing the opposite. This is particularly the case when the family is on one end of the spectrum. For example, children who grow up in a highly frugal household may respond by taking a lax approach to finances, or vice versa.
A positive relationship with money is empowering. It can help your children achieve life goals, from that first must-have toy or bit of tech to their first home and, ultimately, financial freedom. So today, I want to share some tips for fostering a healthy attitude from a young age.
#1 Use a three jar system for pocket money
When giving pocket money or even when your teens start earning wages, encourage your kids to keep separate kitties or jars for spending, saving and giving. Money is all about making choices and empowering you to live the life you want, and you will be fostering this attitude from the outset.
It’s also an easy way to encourage some saving while still allowing them to reward themselves today – it’s ‘live for today while planning for tomorrow’ for kids. They’ll see how quickly their savings jar grows, and it may even encourage them to add a little more when they are saving towards that something special – and they’ll feel empowered when they get it.
The giving jar is a great way to foster charitable giving and show them how they can contribute to the world around them – an excellent foundation for life.
#2 Set up a bank account early
Although interest on cash is low right now, a bank account helps children learn about saving and finances. Together, you can deposit their savings jar, and they’ll see their balance grow. If you are in a position to do so, you may even consider a system where you match contributions or add a bonus when they reach a savings goal.
#3 Help them set goals and define a budget
Budgeting is a critical life skill, yet many adults still struggle with it. When giving pocket money, encourage your kids to think of it as a monthly, 6-monthly or even yearly sum and work back from there to consider what they would like to achieve. A few dollars each week may not seem like much, but looking at it as a lump sum makes it easier to see the bigger picture – setting goals and creating a budget to achieve them.
#4 Talk about money in a positive way
It’s not uncommon to only discuss money with children when you tell them what you won’t buy them – ‘that’s too expensive’ etc. But this tends to frame money as an obstacle to getting what you want rather than something that empowers choice.
It’s important to talk about everyday spending and the financial goals you are working towards as a family. For example, if you have a holiday fund for an upcoming trip, talk to them about when and how you will grow it and help them understand broader financial decision-making. When you are not going to do something because of money, explain why and how you will make better use of the funds.
#5 Educate them on the power of superannuation
Superannuation is not often discussed with children and teens, which is reflected in attitudes towards super among young adults. However, helping your kids understand that super is their money and explaining how compounding interest works can encourage positive behaviours when they start working.
Choose a super fund together, show them how it works, what they are invested in, etc., so that they see it as ‘theirs’ from the very beginning.
#6 Set up an investment account for your children
Involving your children in investing and understanding how markets work will develop their financial literacy while showing them that they can grow their financial position from a small start. There are many small investment apps out there, and they can even get started with pocket money amounts.
#7 Consider a family financial plan
Your Apt Adviser can help you with a family financial plan that engages all family members in the financial goals. These plans can be particularly effective with teenagers, as you can use the family plan to set some goals for each decade of adulthood. It’s often said that making financial decisions without a plan is like deciding how you will get there when you don’t know where you are going – so this is a great way to get them started on the right foot.
It’s never too early to foster a healthy attitude towards money, and doing so early will set your kids up to achieve their life goals. While it won’t buy happiness, it can achieve a more meaningful existence – something we all want for our kids.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.