How to Educate your Kids about Finances

Start early: "Kids can learn from the age of four that things are purchased, and everything has a cost."

Lead by example: "Let your kids see you using cash rather than credit cards, as this allows money to become real."

Teach financial responsibility: "Link pocket money to their needs at different development stages and don’t give too much. Increase it along with the range of purchases they are responsible for."

Moderation is key: "Overemphasising money can lead kids to become self-centred. Differentiate between a need and a want, while encouraging them to save for expensive personal items."

Budget, invest and donate: "Get your kids to put their pocket money in three jars – one for spending, one for saving and one for charity."

Teenage training: "Cut pocket money to encourage teens to work part-time, and divide their allowance into weekly and monthly expenses so they can save for big-ticket items."

Kid Cash

Child-friendly fee-free accounts still exist. Here are two:

BankWest Children’s Savings

Commonwealth Bank Youthsaver

Fast Fact

54% of people aged 18 to 34 are paying off debts – including those from credit cards, personal loans and HELP debt. Institute of Chartered Accountants, 2007

Ringing up Debt?

Answer the call of financial sense

Teenagers have twice the pocket money they did a decade ago, yet are in more debt. The cause? Mobile phone bills. The YouthSCAN survey by Quantum Market Research recently revealed 36% of teenagers felt stressed because they owed money to phone companies.

Financial advisers recommend encouraging them to choose a pre-paid mobile rather than a contract, to reinforce the importance of budgeting. Although the call cost per minute is more, the total amount is fixed. "[As] calls are paid for in advance, it will teach them to value each dollar," says Katrina Birch of finance education organisation Financial Basics Foundation. "If they only have a certain amount they can spend each month, it will force them to budget."

Adds Birch: "The skills acquired will be useful when they come across bigger burdens associated with limit, such as their first credit card or home loan."