First, explain that things aren't free and adults need to work to earn money to buy things. It’s key to communicate that people only earn a limited amount of money each week, so it is important to differentiate between needs and wants. Communicating this important idea early will hopefully make budgeting conversations in the future that little bit easier.
Tip: Next time your child asks for something, ask them if they really need it, or if it's something that would be 'nice to have'. Explaining that we need to put our needs before our wants can be difficult; but it really is a worthwhile lesson.
The concept of saving can be a difficult one to grasp. Explaining how sometimes we don't have enough money to buy the things we want immediately can help them understand. Share the idea that we need to put aside small amounts of money over time to be able to buy them. Make sure they know that these small amounts are what you would call “savings” and the earlier you start saving the better.
Tip: When your child is waiting in line for something like the swings at the park, chat about how they sometimes need to wait for things they want.
It will also help them understand the concept of delayed gratification, which in turn will encourage good savings behaviours in the future.
Tip: It’s great to have this conversation before the first time children are given physical money so that they can start to understand the complexities of what they're holding.
For more tips about money and kids, head to The Beanstalk.
Things you should know
This advice has been prepared without considering your objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider its appropriateness to your circumstances. Terms and conditions for transaction and savings accounts mentioned are available here (PDF 660KB). Please read our Financial Services Guide (PDF 60KB).