How to help your kids inherit good money habits

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Schools don't have the time or the resources to teach your children everything they need to know about money and most of what they learn will be what they pick up from you.

We are not talking about formal lessons here, but the subtle messages that kids pick up from their parents' behaviour and the things they say about money. That's why you need to think hard about how your kids are affected by what you do and say.

The lessons they learn from you will stay with them for the rest of their life and may well determine how they fare financially in adulthood.

Kids need to learn to respect money and feel positive about it. If you don't feel respectful or positive towards money, they'll pick up those feelings from you.

Being disrespectful towards money can range from simply leaving money lying around in places where it might get lost or stolen, to paying your bills late so that you have to pay a penalty or wasting it by buying things you don't really need.

The way you talk about money may give your kids negative thoughts about money. Sayings like "money is the root of all evil" or "you've got to have money to make money" give the impression that it's either not good to have lots of money or that being wealthy is out of the question for people who don't have much to start with.

Constantly arguing about money and the lack of it also creates negative feelings towards money.

The best way to teach kids about money is to give them some to look after, for example by giving them pocket money.

There are, however, a number of mistakes you can make when you are teaching them. Forcing your child to deposit their money in the bank where they can't get at it creates the impression for the child that putting your money in the bank means having to go without.


Teach your child to make their own decisions about how much money they save and where they save it. They will soon learn from their own mistakes – for example when their younger brother raids their piggy bank.

As your kids get older, give them more pocket money, but also make them responsible for paying more of their own costs, such as school lunches, going to the movies and buying presents for their friends. That way, they will learn to budget and plan ahead for bigger purchases.

Don't be tempted to help them out if they run short, though.

Some parents like to pay a different amount of pocket money to their kids each week depending on how many chores they have done. This doesn't teach your kids to budget as they never know what their income is going to be. Give your kids a set amount each week, but allow them to earn a bonus if they do something extra.

They will then learn to associate more effort with more money. To help them further with budgeting, pay your kids by setting up an automatic transfer from your bank account to their bank account. They can then plan ahead for how they are going to spend or save and there is a clear limit on how much money you are prepared to give them.

Before your kids leave home, teach them about debt. Whether they leave home to study or to work, they will be offered a credit card by their bank, and once they go flatting, store cards and finance company loans will be tempting payment options for furnishing the flat.

Make sure they understand the effects of high interest rates on the total cost of their purchases and the types of fees they may have to pay on finance arrangements.

Kids are inclined to be short-term thinkers when it comes to money. Help them to set goals with an amount of money and a timeframe and reward them with a bonus when they achieve them.

If your older kids have a big, expensive goal to achieve that is beyond their usual pocket money, such as an overseas trip for school or sport, instead of giving them the money, show them how they can find it themselves by selling things they don't need, fundraising, working part-time or setting up a small business.

Encourage your kids to believe that they can be as wealthy as they want to be. There is no law that says you can only be wealthy if you are well educated, have a high income or were born into a wealthy family; you just need parents who can teach you about money.

Liz Koh is an authorised financial adviser and author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, 2008. 

- Stuff