Teaching Good Habits Early
Most of the school entering children dont realise that they have about 12 more years ahead of them but what a lot they will learn in that time going from ABC to algebra.
Our childrens education doesnt stop at the school gates though, and in addition to all the other things our kids will learn, one of the best skills we can teach them is responsible money management.
While the idea of being financially independent is appealing to most people, the fact is we have one of the lowest saving rates of developed nations, and this is leaving many households financially vulnerable.
As parents we have the opportunity to protect our children from this situation by teaching them some valuable money basics.
The use of pocket money is a good starting point for teaching money concepts though it works best when the kids actually have to work for the money.
A few simple chores can be sufficient but it is important to teach kids that money is a reward for effort.
And just as adults can earn overtime, you may want to give your children a modest increase in their pocket money if they take on and complete more jobs.
All children seem to grasp the concept of saving, though for very small children the introduction of a piggy bank can be a helpful teaching tool.
This allows them to watch the money physically accumulate, rather than trying to fathom numbers on an account statement.
As children get older they can be introduced to the concept of earning interest, and at this point the piggy bank often loses its charm.
There are plenty of savings accounts available designed especially for children, and while some offer marketing gimmicks like stickers or comics, its best to encourage children to focus on the
main game of earning a decent interest rate.
The other thing to be mindful of is accounts charging high fees. Adults often find it difficult to understand why their bank fees are so high, but for children bank fees can be downright counterproductive, turning them off the idea of entrusting their savings to a financial institution.
As a starting point, online bank accounts can be great for kids. It lets them do their banking on the home computer, they have the potential to earn decent interest, and many online savers are fee free.
Paul Clitheroe is a founding director of financial planning firm ipac, host of Channel Nines Money reports and chief commentator for Money Magazine.