School holidays can be fun for kids, but school holidays can also be a great time to teach your child about money by encouraging them to find ways of earning money in the school holidays.
It’s important that any work your child performs doesn’t take away all their fun time. If they have to skip too many fun activities in the school holidays with their friends, spending time to earn money could make them resent the whole idea of work. Keep a balance so that your child doesn’t come to hate the idea of going to work.
Kids of Primary School Age
In some ways, primary school children are the easiest to teach about making money. They have not yet become jaded with the notion that they deserve money without working for it or that they deserve to be given as much money as their friends.
High School Age Kids
If you taught your child good habits regarding money when they were younger, you should see some fruits of those lessons as your child matures. By high school, your child may be anxiously waiting for school holidays so that they can earn some extra cash.
Ways to earn money for high school kids:
Jobs earning money in the school holidays can teach your child how to save for future purchases, as well as how to get along with others in a work environment. Your child will enjoy the special satisfaction of making purchases with money that they earned themselves.
We are all busy and there is always so much to be on top of, school lunches, homework, after school activities, work, dinner etc. Sometimes teaching your child about money is the last thing on your mind. However, as you know kids learn from their parents and whether you are intentionally teaching them or not just observing how you behave, say and react gives them a sense of what to do. Kids learn more from you then from their teachers and friends combined.
If you don’t take the time to teach your kid about money, they may learn from negative or outside sources, such as a friends, television or other family members who aren’t financially savvy. If you are already teaching your kids about money, this is fantastic and you are setting your child up for financial success in the future. Even if you are already teaching your kids or you are planning to, here are some of the not so good ways to teach kids about money that you may want to be mindful of.
1.Waiting Too Long to Talk to Your Kids About Money
Kids understand more than you think. Starting at age 3 isn’t too early and you can start with simple concepts like what is money, how money is used to buy things from the shops. Playing simple shopping games at home is great fun as well. See What to Teach Kids When.
2. Not Talking to Kids at all About Money or Leaving it to Someone Else to be Their Teacher
Some parents find talking about money to their kids taboo or not something that they should be sharing. Curiosity about money should be encouraged. Obviously, it is up to you what you want to share, especially if asked how much money you have or how much you earn, but these questions shouldn’t be shut down either. These are great segways into explaining how money is earnt from working, how value is placed differently on different skills and jobs and how saving and investing money impacts what you have.
Some schools and teachers teach about money or financial literacy in some form. However, it shouldn’t be the job of teachers to instil good money habits. Always encourage your child to learn about money at school but ensure you are also giving them a good education on the topic at home.
3. Lying to them About Money
Especially when kids are young you may think they won’t understand or don’t need to know. Children understand more than you think and making a habit of lying to them breeds mistrust in what you say or potentially stops them asking questions in the future. Easy traps to fall into is to say you don’t have money when they want a toy or a sweet but then you go and buy the groceries. It’s easy to say money grows on trees when you can simply explain how money is earned. We all do it but just be mindful that the truth and even a simple truth goes a long way to starting a child on the financial savviness journey.
4. Not Showing Them How to Manage Money or Bank Accounts
As your child gets a little older and they have a bank account. Show them how to use it. Gone are the days of visiting a banker at the local branch but simply showing them how to access their account online and showing them what everything means is a great first step.
Next, explain to them about money going in and money going out. Show them actual transactions of when they put money into the account and when money was taken out plus of course the remaining balance. If the account charges fees, explain to them what they are too. However, many bank accounts these days don’t have fees so it is worth hunting around if your account charges them.
5. Uncontrolled Spending
Kids learn from what we do and they use us as their role models. If we spend money without a thought then are stressed when bills come in or when something unexpected happens, this sets an example on how to manage money. Even just the view that you go to school, then university, then get a good job so you pay for a nice house and car needs to be challenged in today’s uncertain world. With more and more technology, different skillsets becoming less in demand and others increasing, companies choosing staff reduction as short-term cost savings, being in a good financial position to weather whatever life throws at you is good practice to have.
Teaching kids how to save and to have a savings buffer for those unexpected events is important. To think about what they spend their money on, not saying you can’t have fun and buy what you enjoy but put it in context of your financial situation. Showing how to manage and track their money through online banking or specific finance apps is also good practice.
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You know how important it is to teach your child to save money. You know that you need to start when they are young so that they develop a good attitude toward money that will stay with them throughout their life.
What is the right age to start? How can you incorporate education about balancing spending with saving money into your child’s daily life without boring them to tears? How can he understand the concept of compound interest at an early age without reading a financial textbook?
It’s actually easier than you think as long as you turn it into fun.
Start Young and Be Consistent
If your child wants a particular toy, start a savings project for them. Get a decorative, colourful savings jar. Have your child draw a picture of the toy they want or go through magazines to find a picture of the toy. Paste the drawing or picture on the outside of the jar, but make sure the jar is transparent so that your child can see the money accumulating inside.
If your child gets pocket money, discuss with them how much of the pocket money they want to put into the jar each week. Explain to them that you will add ‘interest’ to the savings jar on a regular basis.
Once a week, sit down with your child at the table. Take the money out and help your child count it. Then explain that you are adding a bonus, a certain amount based on the amount that is in the jar, and that you will do that every week.
Each subsequent week, make it clear that you put more into the jar because you are paying them interest on both the money that they have put in and the money you previously added as interest. Keep a sheet with the jar that delineates how the money is adding up. This sheet will go far to help them understand the time value of money.
At first, they won’t understand the concept of ‘interest,’ but eventually they’ll get the idea of compound interest and may want to delay gratification by saving more of their pocket money each week so that they will be able to buy the toy they want sooner.
Before you know it, your child will understand that they can put away money now for more in the future, and you will have helped them develop a healthy attitude toward finances.
Continuing on the theme of pocket money, here is a good video talking about paying kids pocket money.
From our recent poll on the Money Moppets website and Facebook page, we found that the average pocket money amount paid weekly is $8.34. And 64% of our readers are paying their children pocket money for doing jobs.
Financial literacy in adults begins with the habits that children develop as their parents educate them about money management. One of the tools for this education can be pocket money.
If used correctly, pocket money can be a tool that helps a child learn how to handle her own money.
They can learn to plan their spending in such a way that they rarely come up short. They may make some mistakes along the way, but will learn how to make the kind of choices that fit into what they want. If the pocket money is at first a small amount to be used only for a few extra things the child wants, but then develops into a larger amount that covers their weekly expenses, they can learn not only money management, but also how to be responsible for their own well-being and independence. If a child’s pocket money is connected to household jobs, then they can learn the connection between work and pay.
Not everyone agrees that children should receive regular pocket money.
Some people believe that children who receive unconditional pocket money not tied to jobs end up viewing money as an entitlement.
Children that receive pocket money in exchange for doing household jobs may make such a strong emotional connection between money and jobs that they end up expecting to be paid for every small thing they do. As a result, they do not develop the feeling they are part of a team/family.
How Much Pocket Money is the Right Amount?
According to the Commonwealth Bank of Australia, it seems that most parents give pocket money in the following amounts.
When it comes to giving pocket money, parents have some very difficult decisions to make so that the system of receiving pocket money results in positive outcomes, like developing independence and responsibility, learning how to manage money and delayed gratification, and understanding the value of money.
What System of Giving Pocket Money Is Best?
There is no set right or wrong about one system of dealing with pocket money over another. How parents handle the issue of pocket money and educate their child about money management will determine whether the system they’ve chosen is right.
Pocket money for kids can be tied to household jobs. According to the Commonwealth Bank of Australia, most pocket money is connected to jobs that the child does around the house. This system can help a child appreciate the value of money, but the parent must take care not to foster the notion that the child should be paid for every small help they give. If this system is not handled well, the parent can end up losing control of the child.
Pocket money can be tied to grades at school. This is another system that could backfire. Some children might be motivated to study hard in order to get a financial reward, but others might end up being overly stressed.
Pocket money can be connected to behaviour. There probably isn’t a parent in the country who has not been guilty of bribing a child for good behaviour. If done sporadically, it probably will not result in lasting harm, but if done on a regular basis, children might develop an attitude that they only have to be good when being paid.
Proceed with Caution
What works for your friends and their children might not work in your family. And what works with one of your children might not work with another. Evaluate each child and your current family situation, and proceed with caution.