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Raising Financially Literate Kids | Teaching Kids to Manage Money

Raising financially literate kids begins at home, and the sooner you begin shaping your child’s relationship with money, the better. Here are our tips to teach financial literacy and money management to your child.

Talk to your kids about money

You don’t need to be a money expert to teach kids about money. There are opportunities to start a financial conversation every day, at home or out and about.

Always be open lay the groundwork to thinking about where money comes from, how it is spent, and how budgets work. It’s important that children learn early that money has to be earned before it can be spent, and that spending often needs to be prioritised.

Earning money

Your child knows you go to work, but depending on their age, they may not understand why. Let them know that you get paid a certain amount of money for the work you do. Your employer is effectively buying your time and skills.

We cannot survive without an income, so talk to your child often about the work they would like to do when they grow up. Explain that some jobs are better paid than others, and finding meaningful employment that satisfies their personal wants and financial needs is important.

Tip: Help your child equate earning and spending with conversations like “I would have to work for 90 minutes to be able to buy that item”.

Spending money

Unlike pocket money, the money you earn has to cover essentials first, like housing, food, electricity, transport, and clothing. If possible, some money should be put aside and saved for emergencies, too. Any leftover money can then be saved or spent on things that are nice to have, but not important to have.

Needs versus wants

When your child asks for something, remind them to consider ‘need’ versus ‘want’. Children will often say they ‘need’ something, when in fact it’s something they want rather than something they can’t live without.

A need is something essential, like new school shoes, but toys and games are wants. Learning the difference while young can help your child better manage their money when they get their first job.

Tip: Ask your child to wait three weeks to see if they still want the new item they are pleading for. Quite often, they have changed their mind about it in that time frame and decided they don’t ‘need’ it after all!

Bills, bills, bills

Bills are a grown-up’s concern, but their existence shouldn’t be hidden from kids. Children are often unaware just how many bills are received each month.

If your teenager has a mobile phone, or a habit of leaving lights on, show them the bills you pay and how many days you work each month just to meet those essential bills. Be sure to include rates notices, car registrations, household insurances, grocery bills, mortgage or rent payments etc. The cost of living is scary – don’t let it be a shock to your child when they eventually leave home!

A cashless society

Compared with our own childhoods, children nowadays rarely see cash transactions. Items are magically paid for with a wave of the phone or a tap of a card. This detachment from the reality of money can be difficult for children to reconcile.

Show your children how EFTPOS (Electronic Funds Transfer at Point Of Sale) works by communicating with your bank account and transferring YOUR money to the retailers account. Log on to your bank account and show your child how the money has debited and left your account. Each time you tap and pay, you have less money in your account.


Mum and daughter figure out budget

Show your child how much of your income needs to be allocated to essentials each month, and how much is left over. Help them learn how to get the best value for the money they have by formulating a budget.

Budgets consider:

  • different prices for similar items
  • how to compare deals
  • how to work out which items are better value
  • how to work out price differences and discounts

Consider purchasing The Barefoot Investor book to help understand budgeting and family finances.

Making money decisions

The best way for your child to become financially literate is to practice it. Let them be involved in household budgeting decisions, saving, and spending.

Challenge your child to come up with the best deal for a purchase, or a budget based on your family’s actual income and financial obligations. They will soon develop an understanding of the cost of living, and probably save you a lot of money as a result!

A budget of their own

“Employ” your child by giving them a fair rate of pay for work done. This can be in addition to regular pocket money, or in place of pocket money depending on your family’s financial circumstances. For example, instead of outsourcing chores like lawn mowing at $50 a time, you could save by paying your teenager $20, with the payment increasing as their skill develops.

Other age-appropriate work might include:

  • vacuuming the house
  • washing the car
  • scooping the pool
  • cooking dinner
  • hanging out and bringing in the washing
  • packing and unpacking the dishwasher
  • cleaning the bathroom
  • walking the dog

Make sure you withhold or reduce their pay if the work is not done, or not done properly. This helps to teach kids that they only get paid when work has been done to a certain standard.

Saving for the future

First employment as a teenager or young adult is an exciting time. At that age, though, children are very focussed on their social life and don’t want enjoyment to marred by thoughts of saving for a car or a house deposit.

Developing good financially literate saving habits early and organising their income into “pots” can help them to save and still have money for fun. Encourage your child to divide their income into pots (most banks offer sub-accounts for different financial goals) by percentage, i.e. 50% saved towards a future home, 25% for essentials like transport to work and mobile phone bills (needs), and 25% for discretionary (wants) spending.

Tips and traps on the way to becoming financially literate

Girl holds up credit card and hand in a stop sign

Here are some further things to consider on your teenager’s path to financial literacy.

  • Banks are a useful source of information. They can help your child set up a bank account with sub-accounts for different financial goals and introduce your child to the idea of earning interest.
  • Once a bank has your child’s contact details, look out for that invitation to a credit card soon after their 18th birthday! Hopefully by this point your child will be sufficiently financially savvy to understand that credit must always be repaid with interest – and the “wants” it pays for just aren’t worth it in the long run.
  • Research budgeting apps. Tech savvy children appreciate the instant access to the information they want.
  • Give the gift of knowledge. If your child shows an interest in being financially literate, books like The Barefoot Investor are a great resource.
  • As with all parenting, model the behaviour you would like your child to copy by practicing good financial habits and showing your child the value of good money management.

This article was featured in Issue 53 of our printed magazine, Aug/Sept 2022.

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Joanne Crane

Joanne loves speaking directly to people of all ages through the medium of writing, sharing tips and knowledge for families and kids to help everyone get the most out of life. Her focus is on the development of resilience, confidence and independence in children, and on helping families engage and create lasting memories. Self-esteem, self-respect and self-worth are vital skills that Joanne believes children need to learn early to help them grow as adults.

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