Teaching your children to be financially literate


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If you want your kids to be financially savvy it's up to you to teach them about money matters from an early age. And there's more to helping your child become financially literate than giving them a piggy bank and some regular pocket money.

Start by talking to them about money fairly early on. You can show kids the value of money by explaining what $2 or $5 can actually buy.

The Financial Literacy Foundation website, understandingmoney.gov.au, says it's important that children understand where money comes from.

When you withdraw money from an ATM they may well think the money simply comes from a hole in the wall! Explain that the card is linked to your bank account and the money in there is what you have been paid for your work or saved.

Make sure your kids understand the importance of shopping around and comparing prices. A good place to do this is the supermarket.

For example, if you're looking for sliced cheese get them to help you identify the best deal. You could also get them into the habit of scouring catalogues for specials.

Giving your children pocket money is another strategy which can help teach them about the value of money and successful budgeting. Knowing they have a certain limit of money may make them think twice about spending.

The Understanding Money site says you need to be clear about what you expect your kids to do with the money - for example, do they need to use it for their canteen lunch or is it meant to be treats.

You'll also need to decide whether to pay the same amount each week and top up for extra chores or pay only if certain jobs are done. When they reach their teens you may encourage them to get a casual job so that they know what it's really like to work for their money.

The good old money box can still have a significant role to play, but give them two instead of one. The first can be for spending and the second for saving. You may even choose to give them a third for giving away to charity. You can help them decide how much money they allocate to each box.

As kids get older, and have more money to save, you may opt to introduce them to the financial world by opening a bank account. There are plenty of accounts designed specifically for kids - some paying quite good rates.

One of the best is the Bankwest Kids Bonus Saver. Available only to under-15s the account pays an impressive 10%pa interest each month when $25 to $250 is deposited and no withdrawals are made. There are no account fees.

Most kids' accounts tend to be structured this way as "bonus saver" accounts meaning that your child will be rewarded with a better rate if they make a deposit and no withdrawals in a given month.

As with adults, having a goal encourages better saving habits so talk to them about setting goals.

Ask them what they have their heart set on and find out how much it costs. Let's say it's a toy worth $50.

Explain to them that if they save $1 a week it would take a year to buy it, but if they upped the amount to $2 a week they could afford it in half the time.

If you want to offer a further incentive to save consider a co-contribution - maybe 50c for every dollar they save or dollar for dollar if you're feeling generous!

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