Teaching children to start saving sends the right message

YOUNG children are like sponges, absorbing all kinds of information and this includes their parents’ relationship with money.

So you need to be careful right from the start about the messages you’re transmitting, says Money Doctor John Lowe.

“Whatever emotions you display — nervousness about money, arguments about it, meanness — these transfer to children.”

Parents must know their own values regarding finances before they can teach children good lessons about value of money. Are you responsible? Do you comparison shop? Do you budget?

“If children see you working off a grocery shopping list every week, if they see you checking food is in date, if you consistently buy the best value products, all that will stick.”

By the time a child’s aged six, he should be brought to the credit union or post office and an account opened for him. “When you return to update his passbook, he’ll see there’s an interest amount — explain the bank decided to give him that because he left money in for a while.”

Lowe believes parents should be upfront, in an age-appropriate way, about household financial difficulties, but Lorraine Allman, author of Enterprising Child, Developing Your Child’s Entrepreneurial Potential, advises against this. If you can’t buy a particular toy for your child because money’s tight, resist saying “I can’t afford it”.

“This can set up a negative association with money,” she says, while acknowledging that childhood lack of money often sparks entrepreneurial interest in young people.

Allman advises parents to pay with cash when children are along for the shopping trip, to let them see and feel actual money, as well as use the supermarket’s self-service till. Let children hand over money to shopkeepers plus receive change and receipt.

Chat with children about the work-money equation. Ask: where do Dad and Mum go all day Monday to Friday? Why do they work? Teach kids to prioritise: At age five or six, you might give your child a small amount of pocket money in return for helping with tasks — sorting washing, bringing dishes to the sink, helping feed pets. Also ensure the child has set chores for which he doesn’t get paid.

Lowe recommends guiding and advising children around money, rather than directing and dictating.

“Encourage and praise rather than criticise and rebuke. You have to let them make mistakes and learn from them.”