Twice in the last week I have one of my small boys ask me for a toy or treat and I've caught myself saying, 'No not today, Mummy doesn't have enough money.'
Our funds are tight, as they are for most families with kids. We're saving to build a new house and we've had our fair share of unexpected budget blow outs with a wheel almost falling off my car (there goes $2000) and a minor plumbing mishap.
Hubby and I are not bad with money, but we're not great either. I really want my boys to learn good financial habits as I know it's a vital life skill. As parents we know how to help our kids learn to read and write, to be polite and kind to others and to look after their belongings. As they grow we teach them to ride a bike, cook and clean and eventually drive a car. But how do we teach our children how to save money and manage it well throughout their lives?
I realised that I had no idea so I did some research. This is what I learnt:
1. Show them the money. Money is an abstract concept for kids, especially these days when we don't actually see notes and coins as so many transactions are electronic. Packages arrive in the post and when asked where their contents come from, my response to the kids is often, 'I bought it on the computer.'
My boys know that the plastic cards in Mummy's purse are used to buy items from the shops and I had long conversation with my seven year old about the Smiggle gift card he received for his birthday and how it has, "money on it" that he can spend in the Smiggle shop. When you explain electronic money to kids it sounds bizarre, even to an adult.
Psychologists suggest that in order to help younger kids gain a sense of how money and saving work, you get a big jar and put notes and coins in it to save for family events or purchases such as a trip to the movies, the Zoo or a new household gadget or toy that everyone will enjoy. Kids love watching the jar fill, counting and recounting the contents and they get a sense of money as a tangible thing. They also learn that it often takes time and patience to get what you want.
2. Make it a family affair. Recent research suggests that finances are the biggest single cause of stress for Australians yet many families are not very good at talking about money. Parents may save those conversations until after the kids are in bed, assuming that it's stuff that kids don't need to hear, especially if those conversations are tense or difficult.
But we know that kids learn a huge amount from the example that we set as parents. If we never talk about money and how to save or spend it well when they're around, how will they learn? Chances are, they won't.
The advice here is to have family conversations about household spending plans and saving money for the bigger goals. You might like to talk about your ideal family holiday or the new house you'd like to buy. You can create a vision board with pictures of your goal as a reminder and incentive.
Explain to the kids that there is a certain amount of money that comes into the house each week and if you, as a family, decide not to spend money on ice creams on the weekend then that's money that can get you a step close to that picture that you're working towards. You may find that they understand a lot more than you might expect.
3. This little piggy likes to donate and invest. If your pre and primary school aged kids are anything like mine, you probably have a piggy bank sitting around somewhere containing $4.75 worth of tooth fairy money or a collection of loose change that they've gathered from under the coffee table or the shopping centre car park.
Piggy banks are a great way to store money but they're not great for teaching kids about money, its value and how to manage it.
I've gone for the piggy bank upgrade and have ordered two of these.
This clever little piggy helps kids to learn about their options when it comes to money. They can pop their allowance or other money they receive in the spend section but when it's gone, it's gone. They can also set a spending goal and save to meet that goal using the 'Save' section.
Thinking longer term, you can work with your kids to help them learn about saving for the future with the 'Invest' section. This might be money that they save up to open an investment account. Compound interest is great when you start young.
Finally, you can help kids learn the value of sharing their money with others who are less fortunate with the piggy section that I like best, 'Donate'. Helping kids to understand that through saving their money and giving back by donating they learn not only the value of money but the value of community and sharing and that can only make the world a better place.
A final word from the experts about kids and money - and this is one I'll take to heart - don't say, "We can't afford it" unless it's absolutely true. It sends a confusing message to kids who might worry that you can't afford essentials. You might try, "Do you think that's a good way for us to spend our money?" I don't know if it will work but it's worth a try.
Do you talk to your kids about money? Got any tips?
I've written this post for you and also as an entry to Heritage Bank's Savvy Saver Blog Awards (You've got to be in it to win it, right?) The winner is determined by reader votes so if this post has helped you, I would love it if you can drop by and vote for Potential Psychology. Everyone who votes has a chance to win a $100 gift card and entries close on 9 October 2015. Thank you!