Educating Your Children About Money: 28% of Parents say they still bail children out past 25
Teaching your children about money from a young age is essential to equip them with the knowledge and habits they need to make informed financial decisions throughout their lives.
We recently conducted a survey across 2500 parents with children aged 21+ which revealed 28% still bail their children out financially.
Finance expert Gary Hemming, from ABC Finance gives us a comprehensive guide on what to teach your children about money, when to start, and why it's so important.
What to teach: Early Years (Ages 3-5): Introduction to Money
- Identify Money: Teach children to recognise different coins and notes, understanding their values.
- Basic Transactions: Introduce the concept of exchanging money for goods or services.
- When to Teach: Start these lessons when children begin to recognise numbers and express curiosity about buying things.
Why It's Important:
Laying the groundwork for financial literacy helps children understand the value of money and the basics of transactions, fostering early financial awareness.
What to teach: Childhood (Ages 6-12): Building Financial Foundations
- Saving: Introduce the concept of saving money for future purchases or goals.
- Budgeting: Teach them to allocate their money for different purposes (spending, saving, donating).
- Earning Money: Discuss how people earn money through jobs and chores.
- Banking Basics: Introduce them to the concept of banks and how they keep money safe.
When to Teach:
These lessons are most effective when children start receiving pocket money or have opportunities to make small financial decisions.
Why It's Important: During these formative years, children develop habits and attitudes that can last a lifetime. Teaching them to save, budget, and understand the value of earning money prepares them for more complex financial decisions in the future.
What To Teach: Adolescence (Ages 13-18): Enhancing Financial Skills
- Smart Spending: Encourage critical thinking about purchases, differentiating between wants and needs.
- Investing: Introduce basic investment concepts and the importance of growing their money over time.
- Credit and Loans: Explain how credit works, the significance of credit scores, and the implications of debt.
- Financial Planning: Teach them about setting long-term financial goals and the steps needed to achieve them.
When to Teach:
These lessons should coincide with milestones like their first part-time job, opening a bank account, or planning for college.
Why It's Important:
Adolescence is a critical period when young people start to gain independence. Providing them with knowledge about more advanced financial concepts prepares them for adult responsibilities, such as managing credit and making informed investment decisions.
What To Teach: Young Adulthood (Ages 18+): Preparing for Financial Independence
What to Teach:
- Budget Management: Reinforce the importance of living within means and planning for future expenses.
- Insurance: Explain different types of insurance and why they're essential for financial protection.
- Retirement Planning: Introduce the concept of retirement savings and the benefits of starting early.
- Tax Responsibilities: Teach them about taxes, how they're calculated, and the importance of timely payments.
When to Teach:
These lessons are crucial as young adults transition into full independence, especially when they start their first full-time job or move out on their own.
Why It's Important:
As young adults take on more financial responsibilities, having a strong foundation in these areas is vital. It ensures they can make informed decisions, avoid common financial pitfalls, and build a secure future.
Finance expert Gary Hemming from ABC Finance says:
Teaching your children about money at each stage of their development equips them with the necessary skills to navigate their financial journeys successfully. By introducing appropriate concepts at the right time, you can help your children build a solid foundation of financial literacy that will benefit them for a lifetime. Remember, it's not just about imparting knowledge but also about modelling good financial behaviours and encouraging open discussions about money, ensuring they feel prepared and confident to manage their finances effectively.
