Learning how to manage money is hard enough for children, but in today’s digital world, this task is even more difficult as purchases get more and more invisible, and children see actual cash less and less.

The Commonwealth Bank of Australia recently conducted research that demonstrates some of the problems parents face when they try to explain what digital money is to their kids.

• 40% of five year-olds think you can use a card to get free money from the ATM;
• 61% of six year olds think you don’t have to pay money to watch movies on your parents’ tablet or smartphone; and
• 33% of five year-olds think there's someone behind the wall who gives their parents money when they put their card in the ATM.

When you read these statements, you might think that your parenting job is too complicated. You might throw your hands up and say that they’ll get it one day when they are older. But when they are older might be too late. Don’t wait. Everyone should start explaining digital money to kids when they are still very young and it's not hard to do.

Understanding Digital Money

When you go to an ATM to take money from your bank account, explain to your child that the ATM is connected to your account at that bank and will give you money as long as there is money in your account. Clarify that whatever amount you take out at that moment will be subtracted from your account balance.

Give similar explanations when you pay for purchases with a debit card at the supermarket or at the shopping centre. Make sure that your child understands that the cost of the purchase will be subtracted from your bank account.

The concept of actually paying for an item gets even fuzzier when purchasing items online. Once again, it’s important to clarify with your child that the cost of that item will be subtracted from your bank account. It can also help if you take your child to a physical store where they can see the very same item with a price tag.

The concept of money being taken from your bank account will be difficult for your child to understand. So when they seem ready, take them to a bank and open a savings account with a debit card. Teach your child how to access the account online so they can track their own purchases. Having their own account and being able to see the money going in and out will solidify the concepts you have been teaching.

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This is the beginning of financial literacy for kids. Wow, financial literacy sounds like something that should wait until university. It is clearly important for everyone, but do individuals really need to start learning it when they’re still kids?
Yes, they need to start learning about money management before they even enter school. The habits that kids develop regarding money will provide the basis for solid financial decisions once they get older.

You might think that kids cannot understand how to delay gratification by understanding the difference between needs and wants, but you’re not giving kids enough credit. Money management for kids doesn’t have to be too difficult, but parents need to be consistent.

Let’s take a look at how kids can begin learning how to prioritise needs before wants as early as pre-school.

Ages 3-5
This is when kids can start learning that they might have to wait to buy something that they want. This is the very beginning of learning how to delay gratification.
Here’s a way to start teaching this. Take your pre-school child with you to the supermarket for your weekly shopping. On the way to the store, explain to your child that this shopping trip is to buy the family’s weekly necessities and that only items on the list will be bought.

When your child picks out something that he wants rather than needs, draw his attention to the list and say, ‘Let’s take a look to see if that’s on the list.’ When it’s not there, your child will start to learn the difference. On some shopping trips, you might give your child permission for one ‘want’ item, but not on every trip.

Ages 6-13
Create a saving jar, a spending jar, and a giving jar. When your child receives money, have him divide the money equally into each jar. Then on occasion, he can use money from the spending jar for small purchases.

You can also set a goal to buy something that the child wants. It should be something small so that he can achieve the goal before frustration sets in. When he has enough in his saving jar and actually makes the purchase, he is learning money management.

As the child moves to the top of this age range, the goal can become more long-term, and you can explain more about your own spending decisions. Make him part of the process of paying bills and making decisions about larger purchases.

Ages 14-18
This is the time to bring your child into the process of budgeting a certain amount of money each week for his needs and wants. It is important to have your child commit to a written budget that you have worked on with him and that he will be responsible to keep.
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Model Correct Behavior and Be Consistent
Money management for kids is a matter of instilling the right habits from an early age. The most important determiners of whether you will be successful or not are your modeling and your consistency. If your child hears one thing from you but sees you putting wants before needs, he will be confused and not learn how to manage his money. Likewise, if sometimes you make him follow the rules and other times not, learning financial literacy will be slowed.

For more information about financial literacy for kids, visit our financial literacy basics section.

It’s never too early to start your youngsters on the path of being money-savvy! Learning how to save money and how to be smart with financial choices are important lessons that will have a large impact on their lives for years to come. If you’re unsure about how to make saving money fun for your kids, take a look at these 5 money saving tips!

1.    Have Jars To Collect The Money

The first step to getting a child excited about saving money is to let them see their progress in a fun way! Use 3 clear containers, one for spending, one for saving and the last for giving so that they can see the money build up in each jar. Make it into a craft activity and let them decorate the containers with their name, stickers, money signs and more!

2.    Put A Percentage of Allowances Into Their Money Jar

Whether your kids earn money by doing jobs around the house, or they get a weekly allowance, show them how easy saving money can be when they put a little bit away in their savings jar every “pay day”! Consistently putting away a percentage of your earnings for something in the future is one of the best ways to save money. You can even do the maths with them, and show them how much money they have saved up in just a few months to get them really excited!

3.    Ask For Money Instead of Presents

This tip can be used by money savers of any age. If a birthday or special holiday is coming up, request to be given money instead of physical gifts. This way you can add the money to your savings jar and get closer to reaching your savings goals – or make that one big purchase you've been eagerly saving for!

4.    If Something Breaks, Fix It

Instead of going out and spending money to replace anything that breaks, try and fix it with your child instead. You can glue toys back together or learn how to repair a bike, you save tons of money in the long run!

5.    Train Your Little Shoppers

When out shopping with your kids, let them make their own money decisions. If they have the urge to buy something with their money, talk them through the decision: Do they have enough? How much money will they have left after? Will spending this money hurt their savings goal? Recommend that they wait 24 hours before making a big purchase in case it’s just a fleeting novelty. Let them make mistakes with their money, but don’t replenish it for them – sometimes learning the hard way is the best way to learn!

Find more about how to teach your child to save

Here at Money Moppets, our passion is to help parents teach their kids about money so that they can be confident with money as they develop into adults.  For those parents who are confident with money many see the value of teaching their kids and may just need a little help on how to approach it. Those that aren't confident may feel a little daunted.  If this is you don't worry, we are here to help and if you have any specific questions, comment on this blog post and we will do our best to give you some helpful tips.

One way to test your confidence is by how you approach saving money. Most of us know that saving money is an important part of life if you want to have a comfortable living. Whether you want a car, a house, a holiday, or the latest toy, saving up is key. It is not surprising that many people struggle with saving and end up giving up without reaching their goals.  However, there are some that nail it. So, are you a confident money saver?  Test yourself by reading below the 5 common habits confident money savers exercise.
 
1. Know What You a Saving For?
 
“A goal without a plan is just a wish”.  This saying couldn't be truer when it comes to saving money! The first step to success is to identify what you’re saving for. Is it a trip to Paris? A deposit on a house? Money for your child's education? Knowing what it is you want and having a clear goal will help you to stay on track. Have a picture of your goal front and centre so you will see it everyday to give you that extra motivation. Without an end goal in mind, it’s easier to stray from the saving path and spend money impulsively because – why not?
 
2. Know When You Need It By?
 
Now that you know what you are saving for, it's time to determine how long you have to save it.  This time period could be set for you like when your child reaches school age or a timeframe you create yourself. If you are choosing the timeframe yourself, set a realistic but also a challenging goal. If you give yourself too much time, there won’t be enough pressure to motivate you and you will be less likely to stick to your plan. If you don't give yourself enough time, the goal seems unattainable and you will likely give up.
 
3. Have a Savings Plan
 
Once you know your savings goal and your timeframe, take a good look at your financial situation and how you've been spending and saving your money. Determine how you can improve your budget, where you can save money or get a better deal, where you can cut back and what ‘needs’ are you spending money on that are really just ‘wants’. Saving money can mean big changes, like moving house or getting a new job.  In most cases though it means small adjustments to your lifestyle like bringing your lunch from home rather than buying it at work. You might also want to think about how your savings can work harder for you, either in the form of a high interest savings account or investing in shares. All successful savers work out a plan to reach their savings goal, and stick to it.
 
4. Tell Others Your Plan
 
Your family and friends can be a great support in helping you achieve your savings goals. It’s psychologically proven that sharing your goals helps you to attain them, by adding the pressure of making yourself accountable to your peers. You can make your goals feel more 'real' by sharing them. Your social group can cheer you on, offer advice and show their disappointment when you’re falling behind. 
 
5. Review Your Progress - Regularly! 
 
Set regular milestones along your savings timeline, either weekly or monthly, and focus on reaching those goals. If those milestones are big achievements, think of doing something to reward yourself. Keep track of the goals you have reached and how you are progressing. Many banks have savings tools and calculators specifically for this purpose.
 
So how did you go?  Do you practice these habits?

Online shopping has become a well known, popular trend thanks to its convenience and simplicity. However, for all its usefulness the Internet can also be a dangerous place to spend money. This is why it is important to teach kids how to stay safe while online shopping.

Follow these quick tips for buying online to ensure your child has a good understanding of online safety;

• Show your child what sites are safe to buy from, how to find items, review their cart and process the sale. Guiding them step-by-step through the process will show them that safe online shopping can be fun if done correctly
• Make sure they always log out of their accounts
• Encourage them to always stop and seek help if something comes up that they don’t fully understand, or if they think they've made a mistake
• Habitualise checking and double-checking all totals and cart items before submitting any payments
• Remind your child to always stop and think before applying to a subscription or making additional purchases that pop up unexpectedly. These are sometimes scams and should be treated with caution!
• Show them how to comparison shop and do product research to make sure that they are getting the best price and the right product.
• Always use a secure internet connection and antivirus software
• Remind your child that internet shopping costs real money. Limit overspending by letting them use a prepaid card. That way they have a set limit and an idea of how much money they are spending

Payment Methods and Personal Information

Providing personal information is a necessity of online shopping, however this information should always be given out cautiously. Explain to your kids that a site should never ask for personal information like Tax File Numbers, Social Security Numbers or other information that doesn't include a shipping address and payment method. Common payment methods include credit cards, debit cards, PayPal and prepaid cards. The most recommended choice is to stick with prepaid or debit cards to limit overspending.  If using a credit card, always check your transactions and query any that you do not recognise.

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