When you should start talking to your kids about money
It's time to have a conversation with your children about pocket money when you:
- Know what money lessons you want to teach your children;
- Are clear on the rules for giving, using and stopping pocket money; and
- Have decided to use pocket money as the tool to teach them those lessons.
Every week or fortnight, when you hand over the pocket money to your children, check that they understand the lessons you want them to learn.
Have a conversation with them each time you give them pocket money. Ask them questions to get feedback that they understand what you're teaching.
For younger children, it's important that they are having fun with the pocket money tool. Lots of praise and encouragement in the beginning is the key to sustaining their habits.
Any conversation, no matter how brief, is still a conversation. It can be as short as a few minutes - be guided by your child's response and interest in the topic.
Think about the lessons you want to teach
Every exchange of money is an opportunity to teach or reinforce a money lesson for the children.
You have the power to decide what money lessons your children will learn when you hand over their pocket money.
Here are some money lessons you may wish to teach and the conversations you can have with your children:
Earning: Ask your child questions to gauge their understanding of why they are getting pocket money. Ask them how else they can fill up the money box.
Saving: Encourage your child to keep their money away safely in a money box (or bank account for older children).
Spending: Help your child decide how much of their pocket money they should set aside for saving and how much for spending.
Donating: Philanthropy is an important lesson to teach children that money can be used for a greater good. Decide as a family which charity you will support. Older children can decide if they want to support their own charity. Encourage your children to set aside some money to donate to charity.
Investing: For children 11 years and older, delayed gratification is the cornerstone of teaching the child about saving and investing. Mid-teen years are the best years to start teaching children about the concept of investing, using examples of delayed gratification. Help your child understand investing in shares by speaking to them about buying a share of the shops your family frequently visits. Online share investing games tailored to teenagers are a great way to spark their interest in investing in shares. You could also show them how compounding works by using compound interest as an example and explaining the bank statement to them.
This is an edited extract from Kids Money Habits by Amy Koit, founder of kidsmoneyhabits.com.