Sunday, October 23, 2011

Financial habits start early - as young as 1

Financial responsibility and logic should start early. Even as a wee toddler, Miss M loved to collect her money, and would choose to hoard it in her money box rather than spend it - the few times she did spend it on lollies or a little toy she would be so depressed that there was nothing left in the box. A good experience to remind her of next time she was tempted to spend away on something of no consequence.
Miss M has funded her spending money for major trips with her dancing troupe, as well as some bigger toys that she has wanted. At 10, she is now hoarding her money to go halves with her father and I for a car for her 17th birthday, and wants to make sure she saves enough to also have spending money for any future dancing trips we take.
Now that Lolly has come along, I will be taking some of the trick I learnt with Miss M, and applying them to her. My hints:
  • give them a money box early, and keep it in a public space (lounge room etc). Many visitors will enjoy the novelty of your cherub banking their silver, which will reinforce the novelty.
  • routinely give your toddler a little bit of change from your wallet to bank in their moneybox, 20 cents every Saturday after we finish putting away our toys is a good start. Do the moneybox activity together
  • let them play with the money in their moneybox. Playing teaches unit counting, denomination addition (when they are older), sorting, building, etc. It also develops a gleeful hoarding habit as they like to have more to play with and are less likely to spend.
  • do NOT keep them cashed up for unnecessary items. Your school age child does not need money for lunch if you are making it for them. Giving them lunch money just cheapens the value of money for them.
  • let them buy lunch, or donate to school mufti days, or sponsor the school sponsor child from their pocket money. It really underscores what their pocket money is worth.
  • restrict canteen days at school to one particular day per week. This stops child from frittering birthday money or other windfalls while they are still developing good habits
  • help them set medium term goals for their money early. Buying a big toy, or having lots of spending money for a trip gives them incentive to accumulate, and it also reduces the nag factor on you to spend money on these things. I barely pulled out my wallet in America because Miss M weighed up every souvenir to make sure she really loved it before buying it herself
  • start pocket money off when they start "big"school. Keep it basic though. I suggest x2 50 cent pieces only. 1 for the long term money box, 1 for spending or accumulating for short term purchases. You supply their every need already. They do NOT need huge amounts of disposable income.
  • increase pocket money each year by 50 cents only while they are in infants, then 1 dollar per year till the end of primary school. Assess their spending needs in high school and allow accordingly (they should pay for public transport themselves, but you can allow for it in their pocket money). If they have to make the money last to cover everything, they learn more than if the whole amount is just disposable income.
  • introduce "real" banking around age 7 for the long term savings. The understanding of maths is better, and there will be a little more trust that the money really exists if it is out of their possession in a bank. Let them have a folder to keep their statements in, and read them with them each time they arrive. Have a big conversation about interest. Those cents that they earn will feel like a big deal.
  • if you like to bank a regular amount for their future, or have moneys that you don't want your child to be able to direct spending on, keep it in a separate account so that they can really get into banking without confusing restrictions
  • It goes without saying that pocket money's best friend is responsibility. For some households this is chores, for others it is routine completion of homework, music practice, school achievement. Think about what works best for the smooth running of your household and the values you want your child to have

I suggest Commonwealth Bank for those of you looking for a kid friendly account. Although many of the online accounts earn better interest, (and so might be better for the money you are saving on their behalf), they will learn banking better with the CBA who have the system for kids down pat. The kids will be part of the dollarmite club (c'mon 80's kids, you remember it yourself right?) which send out friendly but educational newsletters as well as having a kiddie website. Being able to go into a branch whenever they want to bank their 50 cents is also a stronger lesson than just transferring the money by Internet banking for the little ones. You can introduce Internet transfers when they are a little older.

Do you have any fabulous financial habits for kids you can share with me? I'm always looking for new idea's, and I have yet to find out how my lessons will hold out when Miss M is a teenager.

**Although I work in a bank, it is not the Commonwealth Bank. I have products with my employer as well as other institutions and will share my experiences only if I think others might benefit***


  1. Such an interesting post Elise! Lots for me to think about - Bliss is at a stage where she knows about money but doesn't really know the value of it. I have been thinking about this a lot because I don't want her to "care" about money in terms of money being important, and I want to instill generosity in her but being wise about money is really important and I don't think I've done a great job of teaching her about this so thanks for getting me thinking a bit more practically about how to get started with this!

  2. @Louisa ClaireOh wow! My first comment, I can't believe how special I feel. Thank you so much for taking the time to read and comment, I'm glad you enjoyed.

  3. What a good piece, I am a single mother of two toddlers so money is always tight and its a difficult line to walk between teaching them about money without them learning too early the stresses it can induce!!
    I look forward to reading more of your blogs!!

    The Lone(ly) Parent!!

  4. Thanks for the interesting post. Lots of ideas for me! I found you through @Loisa Claire. I just have a question about your suggested pocket money amounts. You suggest starting at 2x50c when they start school and then increasing by 50c per year while they are "in infants". What do you mean? (Is that a state-specific term, because for sure you don't mean infant like baby < 1 year old)

  5. @Krys - Baby Massage Sorry! It probably is state specific, it might potentially just be me though :) Infant just means Kinder (or prep depending on the state) year 1, and year 2. Primary is year 3-6. But we call the whole school (K-6) primary school though lol. @Lone(ly) ParentWelcome on board - I enjoyed your blog too!


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