Modelling money management

Your child learns by watching how you deal with money. So one of the best ways to help your child learn skills for managing money is by modelling responsible attitudes to money and money management.

To start with, you could think about the messages you send about money management. And you can send responsible messages no matter what your financial situation.

For example, you can send responsible and positive messages when you:

  • set savings goals
  • set aside money for emergencies
  • prioritise the things you need to buy over the things you want to buy
  • work hard to save for something
  • organise your earnings to pay bills
  • avoid impulse buying and check prices instead.

Encouraging responsible money management

As your child gets older, it’s a good idea to give your child more control and responsibility over his money and how he spends it. This will help your child learn important and lifelong money management skills.

You might decide that the more your child has done to earn her own money, the more freedom she can have to decide what to do with it. But it helps to work out some clear guidelines about using money with your child – for example, discuss how much can go into savings, spending and donating.

These guidelines might apply whether it’s pocket money you’ve given your child or money he has earned himself – for example, from a part-time job. It’s important to guide your child towards saving some of his money, rather than spending it all.

Your child will make some mistakes with money management, whether it’s losing a $50 note, spending her week’s allowance in two days, or spending all her money on something that doesn’t seem so good once she has bought it. Instead of giving your child more money, it’s a good idea to talk with your child about what she has learned from the experience and what she might do differently next time.

It can be easy for teenagers to run up large mobile phone bills. It’s a good idea to talk with your child about different types of phone plans. You can suggest starting with a pre-paid plan that has a monthly limit, or agree to track your child’s spending on his phone plan so he doesn’t overspend.

Money management tips for teenagers

Part of learning about managing money is learning to spend responsibly and appreciate the value of things.

These tips might help with your child’s learning:

  • Encourage your child to price and manage her weekly transport costs. This might include school bus fares, social outings and so on. Get her to work out the cheapest option.
  • If you have a pre-teen child, give your child some money to spend on a family day out – but the money has to last your child for the whole day.
  • Let your child buy birthday, Christmas or other presents for his siblings or other extended family members. Working out what to spend on these family members will help him learn to plan and budget. And your child might also better appreciate the gifts he gets from others.
  • Include your child in family financial decisions – for example, when you’re planning a holiday.
  • Make sure your child is aware of what things really cost. If she has saved $100 for a skateboard and it costs $180, help her make a plan for saving the rest. If you agree to help her with the cost, get her to come up with a plan for paying you back.
  • Give your child a budget for his birthday party to decide what to buy or where to go.
  • Step in to help the first time your child runs out of money, but let her know that next time she’ll have to deal with the consequences herself.
When I take a more laidback attitude, it’s actually interesting to see my daughters make mistakes with money. Often they’ll have $20 each to spend and they’ll buy the first two things they see. Then they’ll spend the rest of the shopping trip regretting and revaluating the way they have shopped – nothing teaches them like experience.
– David, father of two teenage daughters

Pocket money and earning money

Giving your child pocket money or an allowance can help him start learning about managing money. But whether you do this depends on your values and financial situation.

If you do give pocket money, how much to give depends on what you think is reasonable and what it’s for. For example, you might give an allowance to cover travel to school, lunches or clothes, or just for spending as your child pleases.

Paying your child to help around the house is a complex issue. You might choose to pay your child for a few extra jobs, like raking leaves or babysitting, if it helps your child towards her savings goal. But linking family contribution to pocket money might interfere with the idea of your child contributing just because she’s a family member. Just go with what works for you and your child.

If you do decide to link pocket money to chores, it’s a good idea for the chores to be regular – for example, tidying up the bedroom daily or weekly, putting out rubbish bins each week, feeding the family pet each day, washing the car each week and so on. This gets your child in the habit of working to earn money.

You might also consider having your child’s friends work for you and your child work for their family – teenagers often do a better job and learn more at someone else’s house. These kinds of arrangements also strengthen young people’s social skills and ability to accept payment graciously.

Informal jobs that your child could do at a friend’s place include feeding their pets while they’re on holiday, babysitting or cleaning cars.

I expect them to help around the house as a matter of course, and then they get pocket money for special things like running errands, helping our elderly neighbours and doing shopping for me.
– Mel, mother of a pre-teen son and a teenage daughter

Saving money

As they grow up, children start to think about saving for something they want. This is a key step in learning money management and developing responsible financial habits.

These tips can help encourage your child to save:

  • Encourage your child to always save some of his pocket money or birthday money.
  • Help your child set short-term and long-term savings goals. It might help to use a chart so she can see the savings growing and see how close she is to her goal.
  • Encourage your child to get involved with school banking.
  • Help your child set up a savings account with restricted access, making it harder for him to spend his money straight away. Your child can add an ATM card when he’s older. Also talk with your child about the pros and cons of having easy access to savings.
  • Try a pocket money app. You can use it to set a savings goal with your child, choose a pocket money amount, and track saving and spending.
  • Encourage your child to shop around for the best savings account. Many banks offer no-fee accounts for people under 18 years.

Borrowing money and lending money

You’ll probably be your child’s first lender. This is a good chance to teach your child about the importance of repaying loans as part of money management.

For example, perhaps your child has been saving for some special sneakers and now they’re on sale. You might lend her the last $20 that she needs so she can buy them before the price goes back up. But you might also discuss and agree on a repayment plan.

You might also want to discuss borrowing money from friends, or lending money to friends. Is it something you would encourage? You could talk about why or why not and the importance of paying money back as soon as you can.