5 ways to teach your young child healthy money habits.

Money doesn’t buy happiness (so they say), but it is a super important part of adulting. 

We need to earn to spend, and save to get ahead, and a solid family budget makes everything easier, even if you haven’t got piles of coin to spend as you please.  

That said, money isn’t just for grown-ups! 

As soon as some cash flutters from a birthday card, or pocket money appears in a piggy bank, children start to get spending power; and although it’s natural for young kids to want to buy something (or everything) right away, the early years are a great time to develop mindful money awareness.   

To help you do this with your under-five, we’ve sought some advice from the positive parenting experts at Triple P.  

Triple P’s online parenting programs are currently free for all parents and carers in Australia (head to www.triplep-parenting.net.au to check them out), and their money tips are priceless too! 

Here are five ways to develop healthy money awareness in your young child: 

Lead by example.  

Your little one learns a lot by watching you and other important adults in their life, so think about your own reactions and responses when it comes to saving, finances and budgeting.  

Money cues, like looking for bargains when shopping, saving up for that dress Mummy really wants, or keeping a list of upcoming expenses will be noticed by your child; and Triple P says, “Wherever possible, it can be helpful to try to set a good example yourself.”

Involve your child in some money matters. 

Your under-five won’t totally understand concepts like saving, budgeting and finances, however, you can start to introduce them to the idea of a family budget.  

Triple P says involving your child in a real-life situation, like grocery shopping, is a great way to do this. 

For instance, your under-five could help you put the shopping list together, then pick out some of the items when in store, and Triple P says, “You could even have a simple conversation about the cost of certain items, and praise them when they help you to make the right choices.” 

Explain where money comes from.   

Card taps, swipes and online transfers mean we can go for days (or years!) without touching any actual money, but it is important for your child to learn that money isn’t immaterial and it has to be earned.  

To help them understand the concept of money, Triple P says you can start by explaining that cards or mobile apps are just a way to pay for things, and that the money comes from a bank. 

“It might take them a few more years to get the idea, but having early, calm conversations about where the money comes from can help them understand the basics,” and it counters the idea that money grows in cyberspace!  

Start saving for something.  

Goal-setting, responsibility and ownership are three important parts of growing up, and a piggy bank or coin jar is a great way to introduce your under-five to these life skills, because they get to decide how much money they’d like to end up with (or which thing they’d like to buy), and then commit to adding cash, little by little.  

Triple P says, “Watching their savings grow can be a confidence booster and a source of pride – remember to praise them when their collection expands!”  

It also pays to be charitable in life, and Triple P says, “Saving a few coins for a good cause can also be a great way for young children to learn about money management and making a difference in the world.”  

“The experience can be rewarding for you and your child, and can help them develop compassion for others, too.” 

Teach your child the difference between needs and wants.  

Young children are often impetuous, and it’s developmentally normal for them to want what they see, especially if that thing is a shiny, new toy or a sticky, sweet treat! 

Obviously, there are times when you will indulge them, and with careful saving, they’ll be able to buy that new toy themselves, but it is important to teach your little one the difference between needs and wants.  

For instance, you might say, “You need new shoes, because these are too small, but you don’t need another doll. You already have three.” 

Along the way, Triple P suggests that you, “Try to stay calm and be consistent in your responses. This can help them understand how decisions are made on what to buy – including occasional treats, of course!” 

As your child grows, so too will their money sense. 

You’ll be able to introduce paid jobs to boost their pocket money and encourage bigger saving goals; and Spriggy is a popular app that helps primary schoolers and teens to learn and practise smart money habits.  

Barefoot Kids, a book written by dad and Barefoot Investor, Scott Pape, may also be interesting for your older child. 

And whether you have a natural born saver or spender, the groundwork you do early on will help your child to manage money more mindfully and make the most of what they have – both now and later in life.