If you want your children to develop good financial habits, it’s up to you to set a good example and start teaching them the ropes early. Showing them how to save, budget and spend responsibly will set them up with good habits from the outset, so they can avoid financial difficulties as they prepare for adulthood.

Don’t give your children a sense of entitlement

Childhood experiences often play a significant role in shaping attitudes, beliefs and behaviours about money. One of the biggest mistakes that parents can make is unconsciously instilling a false sense of entitlement in their children, as this can flow into adulthood. Attitudes towards money are difficult to change. Teaching children about the value of money early can help prevent them growing into adults who live beyond their means and from paycheque to paycheque.

At what age should you introduce financial concepts?

In most cases, children are formally introduced to financial concepts in the later primary school years, but they start learning about money well before that. In fact, research suggests that money habits are established by the age of seven. Through observation, children both consciously and subconsciously absorb key concepts about money and develop core behaviours, which they carry with them into adulthood.

When should children open their first bank account?

Once your children are old enough to do chores around the house or receive pocket money, you can look at opening an interest bearing savings account for them. Encourage your children to put a portion of their pocket money into their account and let them spend the rest, so they understand how to create a healthy balance between savings and discretionary spending. This also allows them to see how their money can build over time, earn interest and help them reach future financial goals.

ATM card or no ATM card?

Attitudes and values towards money are often established by the time children develop into teenagers, but the act of using physical cash to make a purchase rather than ‘digital’ money can teach children to spend only what they have and see money as a limited resource. Also teaching children about the value of digital money and how digital purchases are paid for, will become increasingly important in the paperless society of the future.

Top 3 tips for raising financially responsible kids

Here, Elston Strategy Adviser, Sunitha Chamala shares her top three tips for raising financially responsible kids.

1. Teach your kids the difference between ‘need’ and ‘want’

Parents of millennials are faced with the world’s growing need for instant gratification, but it is important that parents teach their children the difference between a ‘need’ and a ‘want’. Understanding this difference can help children make sensible spending decisions from a young age.

“When it comes to the wants, involve your children by giving them a goal to save towards and asking them to contribute towards the purchase. It’s also okay to say no from time to time,” explained Ms Chamala.

2. Chat openly about money

Have conversations at home about financial matters, so children can learn to be comfortable discussing finances and how to make financial decisions. Communicating openly can help children establish a good foundation for understanding personal finance.

Ms Chamala went on to say, “For example, talking to children about the conflict that often exists between unlimited wants and limited financial resources demonstrates the need to prioritise and compromise. It can also reduce the risk of you passing money fears down to your children and them associating anxiety or stress with money.”

3. Encourage a healthy balance between saving and spending

Saving is important, but also allow your children to spend money on things that they want, so that they can make decisions around when and how much to spend while also learning from their mistakes.

Need help managing your money?

If you’d like to arrange an obligation-free meeting with one of our financial planning experts to have a chat about managing your money, and in turn passing these good habits down to your children, please contact us on 1300 ELSTON or email info@elston.com.au.