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5 things your kids need to know about money

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These modern times can be confusing for our kids when it comes to money. Long gone are the weekly trips to the local branch to do your banking and withdraw cash to see you through until next time. Credit cards, debit cards and internet and mobile banking all mean less physical money changes hands, never mind EFTPOS withdrawals where you appear to be given money with your shopping. Before too long we will all be paying for purchases with our smartphones, so how best to ensure our kids grow up with an appreciation of the stuff that makes the world go around? Here are our top five things to teach your kids about money.

1. The value of money

This will change depending on the age of the kids in question. For the under 6s this could well be simply understanding that the big gold coin is a $1 and the little gold one is $2. Following on from that it’s important to understand how it all relates; this could include things like, 5 x 20c pieces have the same value as a $1 coin, and contrary to appearances, the little gold one is worth twice as much as the big gold one. As kids get older you can begin to teach them what their money will buy. Part of this process may have started with the school canteen, but you can also translate it to the supermarket, toyshop or anywhere else you are shopping with kids.

2. Where you get it
Based on what they observe, kids can be easily forgiven for thinking that money comes from the ATM machine or the supermarket checkout. Take a minute to explain to the kids how you get the money in the first place. Take this a step further by giving the kids a list of chores and putting a monetary value to each chore. If they complete the chore they get the money and begin to understand the power of earn!

3. Where to keep it
Once your kids have stashed away some of their pocket money, where is the best place for them to keep it? There are multiple opinions on this topic. Some say a money box is best, some advocate a money box with three compartments; one for saving, one for spending and one for charity (and thus begins the lesson on budgeting for different things). Others still, recommend a bank account. Perhaps a combination of all three might work. When you are looking for a bank account, consider one designed especially for kids and on top of a fun approach to banking you are likely to get a break on fees and some bonus incentives for regular saving.

4. The importance of saving   
Some kids will want to hoard all their money away and watch it grow. Others might want to blow the lot at the lolly shop on the weekend. Either way it is important to help our kids develop some good savings habits early on. A simple way to do this is to set a percentage that your kids are expected to save. Provide the money in denominations that make it easy to separate the chosen percentage. For example, if you want your kids to save half of their money, give them a dollar in fifty cent pieces. Not only are they learning that 2 x 50c equals a dollar, they are also regularly setting aside half of their ‘income’. You might choose to incentivise their savings habit by adding a bonus. For example, an extra 5c in their savings pile. Alternatively look for a kid’s bank account that does this for you, by providing bonus interest for regular savings.

5. What is interest?

Interest can be a tricky one for kids to get their head around. By adding a savings incentive you are already starting to introduce a basic concept of interest. And whilst explaining the way banks work may get a little complicated, letting your kids know that the bank will pay them to look after their money should suffice.

 

Enquire about an IMB Bank Account for kids

Any advice in this information is general and has been prepared without taking account of your particular objectives, financial situation or needs.  Before you act on any advice you should consider whether it is appropriate for you.

Why choose IMB Bank?

Established in 1880, IMB has been helping people achieve their financial goals for 138 years. IMB offers a full range of banking solutions including home and personal lending, savings and transaction accounts, term deposits, business banking, financial planning and can arrange a wide range of insurance and travel products.

IMB has a growing branch network throughout the Illawarra, Sydney, NSW South Coast, the ACT and Melbourne. We have a lending specialist in every branch and a team of mobile lending specialists who will come to you. IMB members enjoy access to free automated phone and internet banking and a team of professionals who are just a phone call away at our locally based call centre.

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