What I would teach my child to do with $10 | Compare The Market
 
 
 
 
 

We’ve all had that moment in life when we say to ourselves: “If I could turn back time, I would tell my younger self to take that chance and not to touch that and definitely don’t go over there.” Now, we’re older and slightly wiser, even though we can’t turn back the clock, we can often change the future… especially through the actions of our bright and promising children!

Besides the regrettable decisions and chances we may not have taken, there is one thing we can still teach our young ones to prepare themselves for the future: how to be money smart. In a time of credit cards, internet banking and online shopping, kids often don’t understand where money comes from, how it’s spent and why we need it every single day.

Teaching children the value of money in real life situations will slowly help them understand the importance of finances and how to save and invest throughout the years. So here’s a situation to imagine: if you gave your child $10, what would you tell them to do with it? Is it something they should put straight into the bank or something they should spend frivolously? It’s time to start the journey of your child’s financial future with small steps and a $10 note.

Before breaking up that $10 note into saving purposes and treats, it’s important to note that money lessons happen at different ages and teaching these lessons are extremely important. As your children grow up, they will have different experiences and will need a better understanding of money. Have a look at the money stages your child will go through and what you will need to teach them as they get older.

Teaching kids about money infographic

After these monetary life lessons have been bestowed onto your child, it’s time to put your money where your mouth is and give them that crisp $10 note. So how should they begin with their new found profits?

Chris Brycki – Founder and CEO of Stockspot

Linkedin | Website

Parents have to focus on starting a savings habit for their child sooner rather than later as these habits often last a lifetime. My parents always encouraged a balance between spending and saving.? Spend too much and you’re sacrificing your future – save too much and you miss out on today.

If I gave my child $10, I would encourage them to save or invest at least half of it and then spend the other half on themselves. I think donating to charity is also a really nice concept to teach children from a young age. It teaches them that the benefit of money can go to someone else rather than to their own needs.

My parents always encouraged a balance between spending and saving.? Spend too much and you’re sacrificing your future – save too much and you miss out on today.

However, I’d also encourage my child to decide for themselves when it came to spending the $10. I believe it’s really the only way to learn! But I would still explain the benefit of saving – if my kid decided to spend it all now, I’ll remind them in the future that if they had saved some of that money, they would’ve been able to buy the things they really wanted now.

Chris Brycki graphic

My five top tips to organise a financially stable future for your kid includes:

  1. Spend less than you earn
  2. Always keep a cash buffer
  3. Start investing early and regularly
  4. Focus on fees
  5. Don’t put all of your eggs in one basket.

As a parent you have the potential to impact both habits of saving and spending. In the end, saving gives you a feeling of achievement and control over your own destiny, which is important at any age.

Jen Bakker – Head of Customer Engagement at MoneyBrilliant

Website

I think that Australians on the whole spend a whole lot more than they need to. The simple act of having a budget or pre-planning purchases may contribute to people having less credit card debt and having more money to put away towards their financial goals.

So in the future, it’s so important that kids understand consumption spending, and how that affects savings. To save more you need to spend less. It’s also good if they know what the savings are going towards, for motivation. In the home, discuss bills like electricity, internet and phone – it’s good for kids to understand that consumption affects how much you pay.

In my home, my kids have a list of chores which they need to do to get their pocket money.  The youngest at 10 gets $8 per week. She puts $5 in her bank account and the other $3 is to spend. If she wants a book or piece of clothing, that $3 is saved over weeks to purchase it. We plan together and then discuss whether the money stays in her wallet or is saved.

Jen Bakker Graphic

If I gave $10 to my kids, at least $5 would be saved in the bank. They would be allowed to spend $3 on themselves and put it towards something they like or want. I would encourage at least $2 to be given to a charity. This would teach them about others in need and that $2 to them may be play money but not necessarily to others.

I believe that good habits are developed in the early years. I was 1 of 5 children and my parents gave us $1 pocket money each per week. 50 cents went into a bank account and the other 50 cents was for our own use. When I wanted to buy a car at 17, I had over $1,000 from the money I put in the bank. So it taught me that the little bits add up to a big bit over time ($1,000 was a lot back then!).

I believe that good habits are developed in the early years. I was 1 of 5 children and my parents gave us $1 pocket money each per week. 50 cents went into a bank account and the other 50 cents was for our own use. When I wanted to buy a car at 17, I had over $1,000 from the money I put in the bank.

My most important piece of advice for my children would be to have an emergency fund as well as a rainy day fund for big unexpected bills. In terms of the fun stuff, it’s great to get into a habit of saving to buy the things that you want rather than need. Lots of life events cost money – buying a house, getting married, having children; so having good savings habits right from the start are essential to getting through these times in the future.

Alex Wilson – Personal Finance Expert at Savings Guide

Website

From the start, parents have to teach kids that money is an enabler; it enables them to do the things that they want and buy the things that they need. Linking money (or pocket money) to working hard and completing chores will distil a strong work ethic from an early age so they know that ‘earning’ is always tied to working hard.

If I gave my child $10, I would tell them to put $5 into savings (tied to a goal they want to achieve), $2 to spend for themselves, $1 to charity and the other $2 into an ‘investment’ – something that will help their money grow or be used to create more money. You cannot under estimate the benefit of teaching kids about ‘investing’ and ‘business’.

Alex Wilson Graphic

I think it’s super important kids learn about financial lessons from the very beginning. My parents taught me that the reason I received the pocket money was due to hard work on my part. They told me that I earned it and that earning your way in life is what will separate you from others.

In the end, it’s not how much money you earn; it’s about how smart you are with what you do have.

Glenn Malkiewicz – Financial Coach at JBS Financial

Linkedin | Website

I think it is important that parents employ effective cash flow management to their own situation. Children’s behaviour is sometimes reflected in what their parents do, so it’s important parents have control of their own savings situation.

As for teaching children, it is important to show the positive impact saving money early can have later in life. Purchasing your first car, taking your first overseas holiday, saving for a house deposit all requires money, and the earlier savings can commence, the more options children can have later in life.

If I gave my child $10, I would tell them to go out and buy something that will make them happy today, but ensure they also save some for future purposes. So spend $5 today and save the remaining $5 for the future. If they apply that approach over a good length of time, they should develop good money management skills which will benefit them going forward.

If I gave my child $10, I would tell them to go out and buy something that will make them happy today, but ensure they also save some for future purposes.

There are two essential components of a budget that I would teach my kids: the money you make and the money you spend. Knowing where your cash comes from and where it goes is one of the first steps to achieving your goals and having a stable future financially. For budgeting to be effective and to have a financially stable future, there are three areas that are important:

  1. A redesigned banking structure that changes a person’s behaviour
  2. Provision for the necessities of life (i.e. your fixed expenses such as rent, bills, food, fuel etc.) plus an allowance for lifestyle expenditure that is motivating and rewarding to you
  3. Regular reporting to track your progress and to make adjustments along the way.  Someone to keep you accountable.

Doing all of these points should lead to a future that is financially stable and also a lifestyle you are happy with today.

My parents helped me set realistic savings targets when I commenced my first casual job. When I started working full time I applied the same approach which led to me enjoying overseas trips, and purchasing my first house in my mid-20s, whilst at the same time having a happy lifestyle.  And to achieve all of that I was saving around 50% of what I earned.  Those savings (which were only small at the start) eventually grew to a point where I could purchase the thing I wanted later in life.

Glenn Malkiewicz Report

It’s important to save and save regularly regardless of your age. I believe the biggest influence on anyone achieving their financial and lifestyle goals is how they utilise their cash flow. It’s important to set a budget plan which is aligned to your goals, and to have someone keep you accountable to that plan.

Tammy Barton – Founder and Director of MyBudget

Linkedin | Website

Start teaching your kids the importance of money and budgeting from a young age. Even as young as three or four; the earlier the better. It’s really important that children learn the value of money so they understand that money doesn’t grow on trees – or that you just use a piece of plastic to pay for things. Offering small financial rewards for completing simple chores can be a great teaching tool in pre-school years. For older children, set up an account so they can put aside pocket money for things they are saving for.

Given ownership of financial decisions, children will almost certainly make mistakes, but small mistakes made early in life may avoid big money mistakes later on.

For a young child, a good general rule of thumb is to allow them to spend half and save half. By exploring money concepts early, you’ll give your children an opportunity to learn about the value of money, the benefits of saving as well as what works and what doesn’t.

Handling money is something we deal with every day, yet it’s seldom taught in schools and is often a topic parents don’t discuss with their children. In which case, children are left to educate themselves about money and this is often done by observing their parents and friends. As a result, they may end up getting into financial trouble as an adult, simply because they were never educated on the principles of good money management when they were young.

Given ownership of financial decisions, children will almost certainly make mistakes, but small mistakes made early in life may avoid big money mistakes later on.

Tammy Barton Graph

Author comparethemarket.com.au

Launched in September of 2012, Comparethemarket.com.au – operated by Compare the Market Pty Ltd (CTM) – has teamed up with a range of Australia’s insurance providers so you can compare some of the latest deals, in one place, side-by-side. The team behind comparethemarket.com.au have experience in insurance, comparison, customer service and digital. If this was a stuffy corporate monologue, we’d tell you that we’re a bunch of subject matter experts specialising in User Experience, Customer Insights & Online Strategies. But to be honest, it’s just as accurate (and a whole lot easier) to say that we’re a bunch of people who want to make your experience with online comparison better. We pride ourselves on the fact that we’re forward-thinking, that we share an entrepreneurial spirit, and the fact that we like to have a bit of a laugh too. We’re all a bit too addicted to chocolate, but no one’s perfect, really.

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