Dealing with money today is more complicated than at any time in history. Because your kids have more to learn about payment methods than you or your parents did, you may be finding it difficult to teach your child what money is used for and how it’s done.

• Where does money in an ATM come from?
• How does the seller get payment when something is bought online?
• How does online banking work?

Sit down with your child from time to time to discuss different ways to deal with money – cash as both paper and coin, ATM, phone app, computer access, debit cards, credit cards, EFTPOS. Don’t tackle all of those at once or your child will be overwhelmed.

Does the Value of Money Change in Line with the Different Forms?
Your child has probably already had some experience with using money to pay for something he wants. Or he’s observed you paying for groceries and might have asked some questions about how you can give paper to someone and get great goodies like ice cream and pizza.
So you’ve probably already explained a bit about the value of money. You can illustrate the fact that different forms of money can have the same value through a simple exercise.

• Take your child to your local ice cream shop. Ask him what he wants, and tell him that you’re going to have the exact same thing.
• Give him the cash to pay for his ice cream, and let him see that you pay for yours with a debit card.
• Once you’ve both finished your ice cream, have a discussion with him about the methods of payment – in this case, cash and debit card. He will begin to understand that the actual cost of an item does not depend on the payment types being used.

ATMs
Your child has probably already seen you take money from an ATM. Be sure to explain to him that you are not getting that money for free. He needs to know that you can only take money if you’ve already deposited money into your bank account.
In order for him to get a grasp of how an ATM functions –

• Let him watch you put cash into the ATM or at a bank branch.
• Explain to him that the cash is going into your bank account.
• Tell him the money will be held by the bank until you decide to withdraw some.

Debit and Credit Cards
Your child will already understand a little about debit cards if he’s seen you use it at an ATM to deposit and withdraw money from your bank account. Let him also see you use it to pay for goods in a store.
Credit cards are a little trickier for your child to understand because how much you can buy with the credit card does not depend on the money in your bank account. You will need to judge when he is ready to advance into the concept of credit.
There is an Australian start-up called Spriggy that helps children save and spend money and issues a child debit card linked to a parents account. The child can earn money (think pocket money etc) and the parent transfers to the child’s account which the child can then spend (and parents track) on their own debit card. I am creating an account for my daughter – will update you on what I think in the next blog post.
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Mobile Payments
Mobile payments come in various forms depending on what kind of smartphone a person uses

• Android pay

• Apple pay
• Samsung pay

These mobile payments will become more and more prevalent in coming years, making your child’s understanding of this system very important.
Explain to him that the phone has an app or a virtual wallet that connects to your bank in order to make the debit or credit transaction at the point of sale.
As you expose your child to the mobile payment type on your smartphone, he will learn little by little that the value of an item does not depend on the payment method but on the actual items that are bought.
 
Start Your Child Saving
You can start training your child into good savings patterns when he is still very young. If you give him weekly pocket money, then discuss with him how much he can set aside for savings each week in his own savings account at the bank.
Let him know in advance that if he meets the goal that you’ve agreed on, you will deposit a bonus into his account. This will start him off in the right direction to save on a regular basis.
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There is no better time to put financial literacy on the agenda for both yourself and your children.  As the saying goes "give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime".  Teaching your children about money sets them up for the future. Ensuring you are investing in your financial literacy, gives you the means to better live the life you are looking for.

Today, we have a special treat.  A guest post from the experts at CodeWeath Property Investment Advisory. 

One of the greatest gifts we can give our kids is to teach them financial literacy, and one of the greatest gifts parents can give themselves is the education to invest for the future. Building the foundation early in kids can be easy and therein developing the right behaviours into adulthood, even easier.   
 
Parents are hands-down the most influential figures in regards to their children’s behaviour with research showing this also extends to money management. Even the wisest financial lessons won’t shape your children’s habits if they don’t observe YOU making fiscally responsible decisions. A perfect example is using a family budget to understand what income comes in, what expenses go out, paying bills on time and to demonstrate the need to save for life’s pleasures as equally as for any unexpected events.  
 
Five (5) important financial values critical for kids to learn;

1. Responsible spending                                                                   
The first concept is that people buy things with money. An increased use of credit cards, internet banking and online shopping means kids often don’t see actual money being exchanged for purchases. Even from a very young age shopping trips should be used as learning experiences.

We all know kids want everything (and want it now!) As kids mature they should learn the difference between their needs and wants. Once they have their own money, learning to differentiate between needs and wants will be a process of trial and error – and there will be plenty of mistakes along the way. The hardest part for parents is resisting the temptation to bail them out when the piggy bank is empty!
 
2. Work/Money connection
​From a young age, children should understand money comes from work, not mum and dad’s pocket or an ATM machine. Begin by explaining why you work, i.e. to make money for the family to buy things you use every day and to save for the future. The best way to help kids make the work/money connection is to pay them pocket money for chores. Kids under six need to be rewarded immediately for the work they have done to make the connection. Older children can receive regular payments so they can learn to budget. One idea is to provide two different containers so they can split their money – spend & save. This reinforces the two ways to divide (and appropriately allocate) their income.

3. Importance of saving 
Kids under seven cannot really comprehend that one day something may happen and they may need money in reserve. This doesn’t mean they cannot get into the habit of saving. Identify things they want and help them set up a savings plan to get them. Kids love instant gratification so they need to learn about the pleasure of delayed gratification! Once they are older enough to understand the concept, open a savings account with your children. This shows them what a deposit is, how interest is earned and also introduces them to compound interest so they see how they can earn interest on their interest. 

4. Budgeting
As they mature, involving your kids in discussions about the family budget helps give them the big picture about costs and spending. Budgeting teaches children the following key lessons; 

• important financial tools they will need later 
• how to spend less than they earn 
• how choices they make NOW impact their future 
• that one often must wait to be able to buy something 

Help older children create their own budgets using spreadsheets, online programs or mobile apps and watch them take ownership of their finances

Concept of debt 
So, your spendthrift has just blown their allowance or their first pay? What do you do? Rather than providing a handout this is an ideal opportunity to introduce the concept of debt. Explain you are prepared to lend them money but also explain there is a cost – when it is paid back, they will have to pay more! This is gentle preparation for the day they need to front up to a bank and ask for a loan. 

Ages 3 to 5: make saving a visual experience
Key lesson:  you may have to wait to buy something you want
 
Ages 6 to 10: learn through trial and error
Key lesson:  you need to make choices about how to spend money
 
Ages 11 to 13: show a variety of purposes for money
Key lesson:  the sooner you save, the faster your savings grow from compound interest
 
Ages 14 to 18: keep track of mobile phone data and usage
Key lesson:  monitor spending and adjust behaviour
 
Parents and young adults on the other hand need to grasp the concept of another five (5) critical financial values relating to investing.
 
1. Difference between good debt vs bad debt
A debt is an obligation owed by one party (the debtor) to a second party (the creditor). It is usually granted with expected repayment which includes repayment of the original sum plus interest. Bad debt is therefore what is more technically referred to as non-deductible debt. In essence, ‘money out…no money in’. Examples of these include personal loans, car loans and even a home loan! Good debt on the other hand is referred to as deductible debt meaning ‘money out…% of money back in’. Examples of these include investment loans for property or shares. So, just because the word debt exists doesn’t necessarily mean you should automatically avoid it. Understanding how to identify the difference can lead to success.  
 
2. Leverage
In a physical sense, leverage is an assisted advantage. As a verb, to leverage means to gain an advantage through the use of a tool. i.e. you can easily lift a heavy object with a lever than you can unaided. In the world of finance, leverage is the use of borrowed money to make an investment and the return on an investment. e.g. If you had an investment property valued at $500,000 and it went up 10% in one year, it would then be worth $550,000. This represents a 10% return on the $500,000 invested. If you borrowed 80% of the funds and invested 20% or $100,000 you would have a 50% return on your money. 

3. Capital growth
Increasing value over time is the underlining principle behind capital growth. The word appreciation (goes up in value) is another common reference as the goal of any capital you invest in such as property, shares or the like, is obviously to see its value rise. Ultimately its simply about making more money than what you put in the first place. The opposite of capital growth is depreciation (goes down in value) which entails items such as motor vehicles and machinery. The concepts of wealth creation and leverage are very closely linked to capital growth so it’s very important to understand their combined significance.    
 
4. Risk
Risk relates to the level of comfort or tolerance of an individual. Also, commonly identified as the gap between uncertainty and opportunity. It’s important to accept that risk avoidance is ultimately an unrealistic objective as everything we do in any aspect of life has a level of risk. The underlining assessment should be more so about risk management through two key concepts.                                                                           

1. Risk appetite (tolerance) or comfort to undertake a commitment categorised as low, medium or high
2. Risk profile (current situation) the ability or even the track record of managing personal financial matters. Again, categorised as either low, medium or high.

 
5. Wealth creation
Wealth creation is all about an accumulation of assets, particularly those that generate income also referred to as passive income as it increases in value without physical exertion. The concept of compounding that is learnt in the earlier years when understanding the basic mechanics of compounding interest, have a similar correlation as assets grow and therefore support accumulation of new assets which are also anticipated to grow in value.
 
Parents are encouraged to start as early as possible to practice these principles and adopt into their family planning. Along with the introductive education of money with their kids, investing will better position them as the kids grow and they themselves reach the twilight of their working lives. Not everyone can be experts in finance, the economy or with investment products although a little education and preparation can certainly improve your chances of success. The key is to either know how to plan and execute a strategy for yourself or alternatively seek the services of a professional who can do it for you.
 
So how can property investment provide the necessary money to fund your kids’ education throughout the thirteen (13) years of schooling?
 
Well ironically, the last consideration is the property itself! CODE Wealth follows 3 x chronological categories in STRATEGY – RESEARCH – PROPERTY.
 
Strategy – is about starting with the end in mind. What school would you like your kids to attend? How much will you need to pay for them to attend that school over the course of that 12-13 year period? How long do you have to generate the required funds? The answers to these questions effectively form the most important part of the equation…time & money! The second part of the equation involves determining the portfolio size & value along with how many properties are actually required.
    
Research – Quantified independent research from reputable sources are the only genuine way to achieve an adequate level of accuracy and impartiality. The three fundamental questions to answer in this area of your process are WHERE to buy, WHEN to buy and WHAT to buy. Unfortunately getting one or even two of these three will usually not suffice. Understanding the drivers of all the categories and knowing how to access the right information is absolutely critical to have a better chance of achieving your time/money goals from your strategy.
 
Property -  There are numerous property types such as units, apartments, houses, townhouses, duplexes, dual-occupancies and more. Which ones suit your strategy? The other key considerations involve choosing the most appropriate strategic property types such growth, cash-flow or hybrid performing properties. The more these core analytical factors are assessed the less you may even have to see the property if at all!
 
CODE Wealth property investment advisory is the benchmark and most trusted name in property investment advice. All advisors are qualified professionals who operate with the client’s best interest, follow a methodical step-by-step process and have a concerted focus on risk management to ensure optimum results.
 
Ultimately using residential property to generate a passive income for your kids’ education is something you can realistically achieve if you include…ACTION.
 
So, if you’re ready to start securing your kids future…call us today!  

Teaching kids how to manage money is very important and so far I have dedicated this site to helping parents do just that. However, many parents have said to me that this isn't enough.  Whilst they want to teach their kids to be money savvy, they want to be doing more for their kids.  They want to set them up well in life so they can afford their own education or buy their own house.

These parents are looking for ways to make some money on the side so they can help their kids when the time is right. Whether it be in addition to their full-time or part-time income, or whether making some money as a stay at home parent.  

Being a parent myself I understand this desire, I want to give my children the best start in life so I am very passionate about this. Not only to earn extra income to further support my kids but also I think it is important that I diversify my income sources to reduce risk.  For me it is not just about making extra money, it is also about protecting the income I make now.  

Jobs demands are changing all the time. Redundancies are more common and you can't rely on a job for life anymore.  For me, I have put the foundations in place to earn money from three different sources.  These are:

1. Salary income 
2. Investment income (money from property rents or capital growth and shares)
3. Business income, specifically I am looking to make passive income from a variety of online business options.  For example book publishing and online marketing.  

Whilst all of these do involve some level of time committment, having income sources that are somewhat passive as well as your day job can help smooth out the ups and downs of the economic cycle and allow you the freedom to save for your kids without burdening you too much today.

Ultimately, by doing this, I am hoping I have the income necessary to help my kids, in addition to their own savings, not to have debt when they finish their education. Or when they want to buy a house or an investment property, they have the money they need for a deposit. 

The information on this site and my future blog posts will not only be about ways to help your kids learn about money but also ways in which you can earn some passive income to have that little bit extra to help save for your kids.  

Leave me a comment below if this is something you are interested in.

Those of you who have read my previous blog posts know I am a big supporter of teaching kids how to spend, save, invest and give.  Even with all the craziness of Christmas, there is no better time to demonstrate these principles.

Whether it is giving to your favourite charity to support those in need or saving money received as a Christmas gift, knowing what to do with money is the important part.

​Here are some easy, no fuss ways to take advantage of helping your kids become money savvy at Christmas time:

​In the holidays, make jars and label them Save, Spend and Give.  This is a fun art and craft activty that then can be used to help your kids manage their money.  

When they receive money from doing chores, outside work or from gifts, get them in the habit of allocating a certain amount to each jar.  I like to use 30% for spending, 50% for saving and 20% for giving.  These percentages can be adjusted as you like or as your child grows and enters teenage years when they start to have their own expenses.

Knowing what to buy children at Christmas time can sometimes be difficult.  A lot of the toys or things they want they get sick of within a couple of months.  If this sounds like your child, and friends or relatives insist on buying them something for Christmas, why not say to give them money?  Whether cash, so they can put it in their money jars or money straight into their bank account.  While this may feel a little uncomfortable, most time the giver will be pleased it is going towards something they really want or something useful rather than something frivolous.

Your child can then determine if they want to spend or save the money received. Ideally, they should spend some and save the rest so they can purchase something of higher value in the future.

Whether you a shopping for gifts before Christmas or shopping in the sales after Christmas, planning ahead and searching for the right price can save lots of money this Christmas.

Many shops have sales prior to Christmas. Sometimes they are on only for one day or only on selected items so knowing what you want is important.  Firstly, write a list of everyone you need to buy presents for and the types of things you want to buy them plus the total amount you want to spend.  

Then start searching online for the things that might be suitable.  Finding the right model, colour etc and knowing what the prices range from prior to buying them is really useful in knowing if you are getting a bargain.  Then, wait for the right time. Starting Christmas shopping about 3-4 weeks in advance is worth doing to make some great savings.

Equally, buy gifts for the following year or Christmas decorations in the sales after Christmas.  This will save you money for next year.

On ASIC's Money Smart site they have an article on 12 Money Tips for Christmas which I thought was very useful for this time of year.

Save yourself this Christmas

Christmas is a joyous time but the lead-up to the festive season can be stressful and can really stretch your finances.

Here are some easy ways to spread Christmas cheer without blowing your budget. 

Borrowing money is a complex issue for adults and can end up being a very emotional problem for people who weren’t given good training about borrowing when they were children.

Whether a loan is on a credit card or for a house or car, there is pretty much no way to avoid borrowing money at some point in every person’s life.

As a result, learning to understand the ramifications of borrowing money should be started early in a child’s life.

Before a child even starts school, they can start learning this important concept. It’s too early to discuss borrowing money, so they can begin to learn about this topic by borrowing toys.

Explain to them that they can borrow a friend’s toy for just a short while and that they’ll need to return it. At first, start with very short periods of time, but eventually extend the loan to the complete length of playtime, always making sure that they return the toy when playtime is over.

Once they start primary school, you can start to transfer what they learned about borrowing toys into the concept of borrowing money. Stop at a store with your child at a time when you know they don’t have their pocket money with them. Make sure it’s a store where they’ll want to buy something.

Explain to them that you’ll be happy to lend them a small amount if they want to buy something and that they can then repay you as soon as you return home. You might even have them sign an IOU for the amount of money they’ve borrowed. The physical paper with their signed IOU will make the concept more concrete for your young child.

Once you can see that your child understands borrowing and repaying money from you, you can then move to explaining the more complex issue of borrowing money from a bank for larger items and paying interest on the loan. You can explain that borrowing from a bank is how you were able to buy your house or car.

Make sure that they understand that paying interest on a loan means that the borrower ends up paying more for the house or the car than if they’d bought it with money that they’d saved.

When your child is in high school, they are likely to want to buy electronic items and may find it difficult to wait until they’ve saved enough for the purchase. In this case, they may come to you for a loan.

If you decide to lend money to them, make sure that they understand how repayments will work. You can set up a repayment schedule online that you both can access. On the payment dates, meet with your child and open up the online schedule to log the payment in together so that there will never be a dispute about whether a payment was made.

It’s never too late or too early to explain to them the difference between good borrowing and bad borrowing. Good borrowing is when you borrow money for something you don’t have money for now but in the future it will likely go up in value or produce an income.  Shares, investment properties and even your family home are good examples of this.  See more on investing. Bad borrowing is when you borrow money for something you don’t have money for now but what you buy doesn’t go up in value or produce an income.  Things like buying clothes or cars on credit is this sort of loan.  Sometimes you just need these things now but always remember that there is a cost to borrowing so these things will end up costing you more in the long run.

One thing to pay particular attention to is pay day loans or cash loans / same day loans.  Businesses like this thrive on those who need cash quickly so charge astronomical interest rates.  It is sometimes hard to get out of debt with this sort of loan.  These are best avoided if possible.

These types of exercises about borrowing will give your child the kind of training they need to understand how to deal with borrowing money in the real world as an adult. Remember that training your child about borrowing is just as critical as all the other lessons you give your child so that they will be a money savvy adult.

See more on financial literacy basics.  

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