Most kids these days will spend at least 13 years at school. Most of the school work is so they will be able to get a good job and move comfortably into adulthood. Unfortunately minimal school time is spent explaining to our children about how to handle money once they start earning it.

Cars, mobile phones, entertainment and holidays are all new experiences which they now have to pay for. To ensure your kids have sound money skills it is time to start now. Most teenagers have mobile phones before they leave school. There are quite a few even in primary school.

In some families, the only time children hear money being mentioned is when their parents are arguing. These children are brought up understanding money in a negative fashion.

Young Children

With pre teenagers the idea is to talk to them about money whenever an appropriate opportunity arises. The 1st step is to explain how we work for a living and in return receive a wage. Then explain how this is used to pay for food, petrol, telephone, holidays etc (anything they understand). To really demonstrate this you could show them in cash what comes in each week and where it goes.

From there you could explain how you pay for some goods and services ie ATM withdrawal, EFTPOS and that it is your money being spent. If they start to understand the basics you are setting a solid base to work from. From here you can stress the choices you make. An example might be. If we want to go on a holiday this year then to afford it we won't be able to have McDonalds every week.

Another way to help their learning is to have a garage sale and allow them to be in charge of selling old toys. They have to assist setting it up and remain involved all day. It may also have other benefits when they see a toy which cost $50 be sold for $5 that was hardly used and still looks brand new. This is a good example of depreciation. You could explain this works the same for motor cars, mobile phones etc just with bigger numbers.

To impress the importance of saving you could have 2 money jars for them. One is for them to spend on anything they like while the other is for saving and can only be used for important items which is agreed upon by yourself. If they receive pocket money then you might split it 50/50.

A good life skill is for them to understand about earning money. If they don't do their chores don't pay them. This is how the real world works. If you don't turn up for work you don't get paid. Sit down with them and outline the new pocket money/chores system. Deduct a set amount for each chore not done. Why not have them make up a contract which is signed by both of you. Make it fun with pictures and silly words and put it up in an appropriate place where your child can see it. If you have more than one child it can be a competition between them.

Some great games that can help teach money skills are Monopoly, Junior Monopoly and Cash Flow for Kids. The latter may not be available in shops but can be obtained on E Bay.

Teenagers

It is good for them to understand that life is about earn and reward and therefore they have responsibilities to match their growing maturity. Where for younger children the connection between chores and pocket money can be varied with teenagers it is worth being much stricter. After all they benefit from greater freedom and can expect to contribute in many different ways.

A good system that in some cases can even be started while still at primary school is making them accountable for their own money. It works particularly well on a major outing. A good example is a day trip to the Melbourne Show. We took our daughter and her friend when both were in grade 4 and instead of the constant requests to buy this and spend that we gave them responsibility for what they spent. We agreed to pay for their lunch but everything else they spent from the money given to them that morning. The key point was we would under no circumstances give them any more money that day! When we first arrived we sat down and worked out prices. As a result the girls knew how many rides and show bags they could spend money on leaving sufficient left over for a drink and ice cream. The day was very pleasant and a good learning tool for them.

This can be further extended to really enhance their appreciation of money. Say you are planning to go on a holiday. You might outline 6 months before what you can afford to do and if your teenagers want any more they have to earn it. This is a fantastic opportunity for them to fully understand the work/reward perspective.

Many teenagers have a part time job at some time which provides many valuable skills like self confidence, responsibility, work skills, handling money, cleaning etc. The ability to improve money skills at this time in their lives can enable them to reap the benefits later. You should encourage them to have all of their pay paid into their Bank account. I know Westpac has an account called One Account which is excellent for those with jobs. It has 2 accounts in one. Their pay goes into the everyday account and allows them internet and ATM access. They can then transfer a percentage each pay across to the savings account. With no fees for students this account is a winner. Teenagers are generally whizzes with anything electronic so using internet banking should be a cinch. Hopefully they will love looking to see how much is in the savings account and therefore will be reluctant to withdraw any!

Having their ""own"" money is another step in the road to independance. We can't stop it or even slow it down just point them in the right direction.

In our ""money is easier to access"" subsection we note that teenagers used to save up for a car. Now days it is to pay for their mobile phone bills. How do they pay for their cars? Most likely via personal loan or paid for by their parents. Now personal loans can be used as forced saving however too often we see people who never repay this type of loan. Before they pay one off they are borrowing again and adding the old debt on to the new loan. It is not a good habit to get into.

Summary

If your children can reach adulthood with a behaviour pattern of being able to save then as a parent you have done a good job in helping them become financially independent