Teaching your children about personal finance

Personal finance is something most children don’t learn in school, and until they grow up and find out for themselves first-hand how to budget and save, they remain blissfully unaware of the challenges and benefits that can come with personal finance management. According to the Organisation for Economic Cooperation and Development (OECD), financial education should be started as early as possible in a person’s life, preferably at school, which will enable school-leavers to manage their personal finances successfully through life. So if you’re a parent, what and how can you teach your children these skills? Here are three important areas they need to know about.


As soon as your children are able to count, you should consider teaching them the basic principles of saving and the value of money. Teach pre-schoolers how to save coins in a piggy bank and how small amounts can add up to larger amounts, which can be saved for a “rainy day”.

For older children, encourage them to set aside part of their pocket money (for completing household tasks) for future expenses, such as that new game or toy they want but can’t afford just yet. Kidspot Australia suggests putting up a chart on the fridge to remind kids of how much money they need to save to reach that amount, or encourage them to deposit their money in a clear container so they can see the money physically growing.


While most children don’t have a problem with saving, many might struggle to spend responsibly – if a child has their heart set on the latest toy, telling them they can’t have it usually results in tears. To teach your kids the importance of spending on what they need and what they want on occasion if they can afford it, is extremely important. Teach younger children what $5 or $10 can buy at the supermarket and let them pay for small expenses, according to ASIC’s Money Smart. ASIC also suggests that you should ask your kids to check that they received the right change.

For older children, let them take control of their own pocket money and decide what to spend a portion of it on each week. They will quickly learn that if they spend all of it at once, they can’t get it back, which may encourage them to spend smarter the next time. It’s also important to teach them about “wants” and “needs”, and help them recognise that “wants” can often be unnecessary, expensive and help them prioritise their spending.


Budgeting goes hand in hand with saving and spending. The basic principle is never to spend more than you earn, which in your children’s case, is the pocket money you give them. This will in turn force them to budget in order to reach their saving and spending goals.