Video: Teaching kids how to budget to become financially savvy

Video about teaching kids about money

Video transcript

David - Helping your child become a savvy money manager is all about teaching them how to take control  of their money. Often they have no control of the money that they're going to earn because they're in a job, they're getting one pay packet a month, or a week. Where they can take control is how they spend that money, and how they work out and decide what's left over for savings goals.

And that starts with doing their own budget. I know it sounds boring, but they've got to go through the process. 

Libby - If they do have a savings goal, they don't know what money is left over to save unless they actually sit and do a budget like adults would do.

So you help them work out what it costs them each week, and then they can see over the month the outgoings, and then they can see what's left over is their saving, then they have to put that away at first and then they can... So, you sort of introduce this in secondary school where the kids are then taking a bit more control of their money and you might pay them on top of the pocket money so that they have a monthly budget plan, and part of that is they have to pay some of their costs, like maybe lunch money once or twice a week, and their transport or bus fares or things like that.

David -  And in the old days, we used to write it down with a pen and paper. Now there are apps on smart phones, you can do it on the web, that's got to be a lot more engaging for them. So they can actually see where their money's coming from and where it's going to.

Now they're going to be shocked when they see where it's going to because they'll have some idea that that they're spending in one area but inevitably it'll be a lot more than they think. So it's building that awareness.

It's also doing things like saying understand what a credit card is and how it's different to a debit card, and how it impacts on your saving and your money management.

It's all about giving them the confidence to ask questions. If they don't understand something, then they ask about it, and you've got to lead that. You've got to give them the confidence to do it. It's arming them with the tools to avoid scams. If something seems too good to be true, it usually is.

Making them understand that if they get an email saying 'Give me your account details on a bank and your password', to have the confidence to say 'My bank would never do that so this is a scam, I'm not going to hand over that information.' It's all about confidence and knowledge which you can arm them with.

If they're asking about what are my savings going to look like if I put my money in one area mand another, point them towards their bank website with all the tools that are there that they can put 'what if's' into different boxes.

Try and build an enquiring mind in your children when it comes to managing your money, because there are lots of answers out there to solve financial problems, but you need to go and find them and talk to people.

Always encourage them to be comparative shoppers. Even with mobile phone plans, you can go on websites now that compare all the mobile phone plans.

Think about when we didn't have mobile phones and what we would spend our money on, and the bills our kids pay now. So, make sure they understand usage means more money. How to get the best plan, all of those areas. Being a smart savvy consumer, saying to a shop keeper 'Hey, is that your best price?' Not being embarrassed to ask that is a really important teaching tool too.

Libby - That's right, they can always ask. It' s good to instill in kids the idea that never be afraid to ask, and especially like in a shop if they think somebody is accidentally charging the wrong price, and they've seen a different ticketed price, have the confidence to politely say 'oh no, I think they've made a mistake', and they can always just be told no, that's not right, but there's nothing scary about being told no, it'd be more of a shame if they didn't have the confidence and it might turn out that they were right all along.

And it's fair enough with things like mobile phones that parents might give a bit of extra money towards that because these days kids aren't using landlines, so you're not getting the same big phone bills so it's fair enough that the kids might put a bit of their money they've earned into it and parents put a bit of money into it. 

David - It's all about teaching your kids to differentiate between good options and bad options, and above all, that they take control of their money. They do that by knowledge, and by confidence.

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Last updated: 09 Aug 2016