10th November, 2017 | 3 minutes
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How to teach your children that money doesn’t grow on trees

by Bec Gleeson
Finance Geek

It’s never too early to teach your kids about the value of money. Indeed, it’s one of the most important lessons you can give them.

In a child’s fantastical world, money grows on trees. Or, more specifically, it spills out of their parents wallets in a steady stream. Things are magically paid for – whether with cash, a rectangular piece of plastic, or more commonly these days, a smartphone.

Kids often don’t know where this supply of money comes from. All they know is that it’s there. To set your kids up for a more responsible attitude towards money as adults, you need to teach them that money doesn’t grow on trees. If you don’t, how will they ever appreciate the treats you buy them? Or how will they ever understand why you can’t afford to keep up with the Joneses?

In teaching your kids about money, it’s important to be as factual as you can. Don’t be ashamed of telling them that you can’t afford a lavish round-the-world holiday, or a swimming pool, or a new car. Don’t be ashamed to share with them how hard you have been saving for your annual trip up the coast.

Struggle-town – or, at least, frugality – is a way of life for many families, and the sooner that kids are aware of these financial realities, the better. And, while you’re stoically saving for the annual holiday, one of the most valuable lessons about money that you can teach your kids is that you can’t buy happiness. You can be thrifty, and happy, too.

Moralising aside, and given that we all need some money in our bank accounts in order to live comfortably, then you should start teaching your kids about money as soon as you can. Talk to them regularly about how you earn yours, what you spend it on, and why you don’t spend it all at once. And give them a taste of what it’s like to have their own.

A pre-schooler’s foray into the free market

You can start teaching the value of money to your pre-schooler simply by making them aware of different denominations. Talk them through the different coloured notes, and the different shaped coins. Marvel alongside them about how a big coin like 50c is actually worth less than a little coin like $2.

When you’re shopping, get them to hand over the money and collect the change. While their little brains will not yet be able to compute values, they are at least gaining an early awareness that Stuff Costs Money in our free market society.

The value of money in primary school

In the early years of primary school, kids are usually ready and able to calculate the cost of different items. When you’re out shopping, you can start to compare costs of things – look at the price of a mango compared to a banana!

Introducing pocket money around this time can help to put the value of goods into context. They could spend their entire week’s allowance on one mango, or they could buy a whole bunch of bananas.

Giving your children a fixed allowance each week helps to introduce the notion of money management, and they can learn the difference between spending and saving. If they spend it immediately, there’s nothing left for the rest of the week. If they save it, they can work towards buying something more expensive. It goes without saying that the latter is the more favourable option – and if you can encourage your kids to save at least a portion of their weekly allowance, then you’ll be helping them develop good financial habits for when they are older.

Primary school kids cope with doing chores around the house for their pocket money. This will introduce the notion that in the big wide world, money has to be earned.

In high school, things get real

By the time your child hits high school, they will no doubt want more money to pay for things like their mobile phone plan, cool clothes and games.

Consider encouraging them to look for a part-time job, so they can really take control of their savings. Whether it’s babysitting, lawn-mowing, or a paper round – there are many ways that a high schooler can earn a little extra coin. By putting them in charge of their own income, they will gain a much greater appreciation of how hard you work!

Now is the time to really reinforce the value of education, too. Your high school children will start making choices about the subjects they want to study, which in turn leads into choices about what job or university degree they want to pursue. As we all know, there is a huge disparity in incomes between, say, a heart surgeon and a barista. Without piling on too much pressure, you can certainly suggest that a little hard work at school may pay off for them down the track.

Find out how to budget with a growing family

Yes, I love budgets!

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