Should I teach my 7 year old about money?

My daughter is 7. Should I be teaching her anything about money, like how to save and spend and things like that?

Sheila Dickinson replies: Research shows that children’s money behaviour is usually established by age 10. However, learning good money habits doesn’t happen by osmosis and it’s not genetic. Kids don’t magically learn to be financially responsible. Some will learn from their friends and what they see on television much more than from school. But the most powerful lessons come from the examples set by their parents and other adults around them.

Rather than letting your children grow up thinking that money comes easily, there are real benefits in teaching kids to understand and use money wisely. Teach them young and they will carry forward that knowledge and live a better financial life. As in all parenting decisions, a consistent approach to encouraging good money habits is essential.

For children aged 3 to 7, parents can show them the value of money by explaining what $2 can and can’t buy. It may be an idea to do this while walking down the supermarket aisle or toy aisle (if you are game!). Let them watch you pay for things and you may even start by letting them hand over the cash or pressing the OK button on the ETC machine. Pay their pocket money in coins, as children need to understand how to allocate their money. Get them to draw what they want to save up for. Keep the goals realistic and short-term, otherwise they will lose interest quickly.

From these activities, they start to learn that different things have different values, and that money simply doesn’t grow on trees and that you have to work for your money. They will know that they have to allocate money for different things as well.

For children aged 8 to 12, parents may encourage them to participate in a school banking programme, or simply start your own with one of the great kids savings programmes available now. This will give them a sense of regular commitment to savings. Get them interested in looking at their bank statements and following how much money they are saving. This will get them used to reading banking paperwork.

Get your kids to start thinking about a medium- or long-term saving goal, and work out how long it will take them to reach that goal. You may give them a combination of notes and coins for their pocket money. This will really strengthen their allocation abilities and efficient usage of spare change. Start showing them the family bills and explain positively that the bills have to be paid to keep the family going.

Saving is a planned activity and something that needs a bit of thought rather than just putting away what’s left over. It takes a fair bit of money and good money management skills to keep a roof over their heads!

This article was contributed by Sheila Dickinson. Sheila is the Senior Vice President and a SFC Licensed Representative (SFC CE no: ANS128) with ipac financial planning HK Ltd. Sheila is also a Technical Representative with the Professional Insurance Brokers Association, Registration Number PIBA-0428-007924. Sheila can be contacted at financial.planning@ipac.com.hk.

ipac is licensed with the Securities and Futures Commission of Hong Kong, CE No. AAN641. ipac is a member of Professional Insurance Brokers Association, member number 0428.

In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any person. Before making an investment decision, you should speak to a financial planner to consider whether this information is appropriate to your needs, objectives and circumstances.