Financial lessons to teach your kids

As many an exasperated parent has complained over the years, school seems to prepare kids for everything except the real world. Or to put it another way, what’s the point in knowing algebra inside out if you have no idea how to save money?

The truth is, financial literacy is one of the most important things you can teach a child. Establishing good saving habits early, not to mention developing an appreciation for the real value of things, will give your child a great head start in life.

This article looks at the difference between needs and wants, the importance of saving, opening your first bank account, and more.

How to teach kids about money

The best way to teach kids about money is to break it down into a series of bite-sized lessons. So, without further ado, let’s jump right in.

Needs vs wants

Human beings have to learn the difference between needs and wants as they grow up because, for the first few years of a child’s life, they are effectively the same thing. A baby cries because it wants milk, but it’s also true to say it needs it. Same thing with sleeping, having its nappy changed, or any of the other limited set of things a baby might cry for. At the most basic level of human existence, needs and wants are virtually indistinguishable.

But once a child is old enough to be aware of its surroundings, things start to change. When little Johnny sees a toy he wants, chances are he’ll kick and scream if he can’t have it. This is because up to this point in his short life, something he wants has almost always been something he needs. And making an almighty fuss has proven to be the most effective way to get it.

The only way to stop this in the first instance is simply not to give in, while explaining as forcefully as your parenting ethics allow that throwing tantrums is unacceptable. But this is only applying a band aid to the problem. What little Johnny really needs to understand is that material objects have value, and that things of value must be earned.

How do you do that? Read on!

The importance of saving

The idea of saving for things you want is perhaps the most important thing you can teach a child about money. This is because it contains two valuable lessons in one. The first is that anything worthwhile requires patience and discipline to attain. The second is that not everything is worth the asking price.

For example, your child might decide that they must have the latest video game all their friends are playing. One way to approach this would be to say, ok, you can have it, but you’ll need to save all your pocket money for the next six months (if that seems excessively harsh, you could offer to pay half if they save for three months).

You have now created a win-win situation. If your child successfully reaches their savings goal, fantastic! But if they decide actually, you know what, maybe Super Mario Meltdown isn’t worth waiting six months for after all, the lesson they’ve learned is just as important.

Which leads us nicely onto youth savings accounts. While piggy banks are all well and good, they’re not necessarily the safest place to stash your cash - and they certainly don’t pay interest! Not only does a Great Southern Bank Youth eSaver Account do that, it’s safe, secure and completely free to open and maintain.

Learning about earning

If saving teaches kids important lessons about patience, discipline, and value, saving cash they’ve earned themselves does so tenfold. If your child is too young for a part-time job, you might consider making part or even all of their pocket money dependent on them doing age-appropriate chores. Or if that feels a bit mean, you could offer bonus pocket money in exchange for domestic tasks. Either way, you can be sure they’ll appreciate money acquired through work more than if it were simply given to them.

Smart shopping

Once your child has developed an understanding of how money relates to time and effort, they may naturally be curious about how to pay less for stuff. Explaining the basic principles of shopping around, be that physically in stores or online via price comparison sites, will stand them in good stead for the future.

Opening their first transaction account

Older kids, particularly those who have absorbed the previous lessons, will likely want the feeling of financial independence a transaction account provides. Not only does a Great Southern Bank Everyday Youth Account come with $0 monthly or annual fees, but your child will also feel terribly grownup tapping and paying with their Visa Debit card and/or smart device!

Speaking of which, while tap and pay is a wonderfully convenient feature, it can have the unfortunate effect of feeling like ‘free money’. In other words, handing over a $10 note feels like you’re sacrificing something in a way that waving your phone in the direction of an EFTPOS terminal does not.

For this reason, it’s a good idea to ensure your child understands how balances work. This might be as simple as showing them how to view their balance in online or mobile banking, or it might require something more ‘real world’ such as representing their balance visually via a poster on their bedroom wall. Modifying it when they spend or save should help to reinforce the link between financial behaviour and outcomes.

Want to start your child’s financial journey with Great Southern Bank?

If you would like to set your child on the road to financial literacy and wellbeing, check out our award-winning youth accounts today. Alternatively, feel free to give us a call on 133 282 or pop into your local branch for a chat.