Teaching your Children about Finances
In the past 24 years, in spite of a relatively strong economy, Australian adults have dug themselves deeper into debt. The ratio of household debt to household earning has trebled – rising from 60-180%. Added to that is the average Australian has around $5000 in credit card debt and it’s clear there is a disconnect between what we spend and what we can afford.
The wealthy families of the world have always taught and involved their children about money from a very early age. The truth is, very few of us got any kind of formal financial education growing up. Firstly a lot of us didn’t understand finances that well ourselves.
Secondly 30 years ago money issues were not talked about as freely as today. We can teach our children about money so they don’t repeat our mistakes.
These 4 tips will help you to raise your children’s financial literacy and help them become adults who make savvy decisions about money.
1. Involve them in family spending
While taking the kids to the supermarket might not seem like a particularly enjoyable experience (at least to anyone who has experience a lolly-induced tantrum in one of the aisles), it’s important that kids understand what, how and why you spend your money. For older children, making a game out of who can find the brand that is the most valuable, or who can find a cheaper alternative to a product on the list can be an excellent learning opportunity. One example is to show kids exactly what goes into the family bank accounts each month from wages and then show children all the spending and where it all goes each month. Interesting exercise?
2. Let them play video games that simulate real-world spending
If, like millions of other Australian children, your kids are into the video game Minecraft, they could be learning more about money than you think. A recent CNBC article argued that games like Minecraft actually teach children valuable budgeting skills, as well as the value of bartering and protecting income.
“Kids are learning about money on a lot of different levels in Minecraft,” says Joel Levin, co-founder of Manhattan-based Teacher Gaming, a firm that works to use video games as teaching tools. “There are basic currencies, like emeralds that you dig up and can trade with villagers,” Levin says. “There are exchange rates, because certain items are worth more than others. Then players have to think about whether to spend money right away, or save it and get something more rewarding later on. These are analogous to the financial decisions people are making in the real world all the time.”
3. Teach them how to save
Open a bank account for your kids and let them see the fun in watching their money grow. Kids love having their own savings and access to it. If they want a new toy, help them understand they have to have the dollars to pay for it first.
4.Lead by example
Remember, children learn most by watching what you do. So the best way to raise the money-wise kind of adult you want your children to grow into, is to be what you teach every day. Budget, save, prepare for the unexpected and live within your means, and you will hand down a rich inheritance of good money habits to your children.
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