Parenting

From piggy bank to portfolio: How to talk to kids about money

24 August, 2024 . 0

Amid cost-of-living pressures, many of us are worried about our finances. But are we stressing our kids out in the process? Here’s how to talk to them about money.

Between high interest rates and inflation, the topic of money is never far from the headlines — not to mention everyday conversations.

According to a survey of 2000 people between August 2022 and February 2023, 53 per cent of Australians were just making ends meet, or worse.

And a recent VicHealth paper noted that financial stress within households can have profound, long-lasting effects on children’s psychological wellbeing.

Why talking to your kids about money matters

Child psychologist Deirdre Brandner says children have already experienced the pandemic and school closures, so those potentially alarming cost-of-living conversations might leave them wondering what is coming next.

Even younger children, while not understanding everything, might be picking up on the worries of those around them, leaving them feeling unsettled or anxious.

But that’s not to say you should avoid talking about money entirely.

“If things are left unsaid, children — especially younger ones — will create their own narratives,” Deirdre says.

“These often involve them casting themselves as being to blame for their family’s financial predicament.”

She recommends parents create a safe space for kids to share any concerns.

Also make it clear to your children — no matter what their age — that you are the one responsible for making ends meet, not them.

However, if your family is struggling financially, Deirdre says kids can feel better if they are involved in activities that contribute towards a solution.

For example, you might encourage them to help make a list of activities that are free or cost very little, such as a family game night or a trip to the park.

Or they could make a game of switching off electrical items when not in use, or turning off the tap while cleaning their teeth.

How to talk to your kids about money

Financial adviser and mother-of-three Keryn Batsilas recently realised that even flippant comments about money can have unintended impacts on kids.

Reacting to her eight-year-old son asking her to buy something, she made the offhand comment: “We don’t have any money for that today.”

His response? “So we’re poor.”

Her son’s interpretation made Keryn, who runs boutique firm Your Life & Money Matters, realise she had to be more careful with her words.

She explained they weren’t hard up but just had different pots of money, and their “fun stuff” budget was temporarily all used up.

Financial adviser Amanda Thompson, of Endurance Financial, suggests being positive and reassuring when talking to your kids about money.

“And use real-life examples … you know, ‘We’re saving for a holiday, so let’s not go out tonight’,” says Amanda, who has two daughters.

“The other thing is you don’t want children to feel guilty,” the single mum says.

For example, her sporty 17-year-old told her she didn’t have to enter a particular running race if they couldn’t afford it.

When to start talking to your kids about money

You can start when they are as young as three and might begin asking for toys, Amanda says.

While children might not yet comprehend the dollars, they can begin to understand concepts of saving and waiting to buy things.

Keep it age-appropriate as you go along.

“Once they’re halfway through primary school, I’ll always say to parents, ‘One of the best things you can do is to take them supermarket shopping and say: How much do you think this will cost?’” Amanda says.

Meanwhile Keryn has set up a share portfolio for her three children, who are aged 8, 5 and 2, along with bank accounts.

While they have a basic idea that there is money being set aside, Keryn says they will chat more about the specifics, particularly those shares, once her children become teenagers.

“Whether you’re an adult or a child, I think one of the best ways you can learn about investing is actually to start doing it with small sums of money.”

She says asking your child to pay for little (or big) luxuries themselves also encourages them to be more mindful of money and realise it is not just something that magically appears via your phone or credit card.

Tips to teach your kids about saving and spending

Ages 4 to 8

Get them set up with a piggy bank, bank account and wallet.

Explain the idea of separate buckets of money (such as spending, savings and a safety net), using cash.

Ages 8 to 12

Consider giving them access to their bank account, into which they can deposit small amounts.

Suggest ways to make extra money, such as 10-cent can recycling.

Ages 12 to 18

Get your kids saving for things they really want, such as brand-name clothes or computer games.

Encourage them to use their devices to compare prices.

More advice on money:

Written by Larissa Ham.