Teaching your child how to manage money early in life and laying the right foundations will help prepare them for the financial challenges that invariably lie ahead in adulthood.

Your role as a parent

As a parent, you play a vital role in helping your child establish positive habits around money, namely earning, budgeting, saving and spending. Often, this is based on your own personal experience with managing money.

Fortunately, you don’t have to be a financial genius to teach your child good money-management skills. As a starting point, it can be as simple as involving them in very basic purchasing decisions and budgeting from a young age. The other important point to make is that, as they grow, their financial awareness and needs will change as they progress through primary school and into high school.

As one of Australia’s leading banks, we’re committed to giving you the right information and tools to guide your child’s financial journey and supporting you along the way. Another great resource to consider is ASIC’s Money Smart guide for Teaching Kids About Money.

Understanding where money comes from

With the emergence of cashless transactions, children don’t often see physical cash changing hands in their parents’ day-to-day transactions. That being so, they may struggle to understand where money actually comes from – that it needs to be earned – and that seemingly magical plastic card in your purse or wallet is not an endless source of money to constantly buy things.

Here, introducing ‘pocket money’ early on is a great idea. Whether it’s a ‘cash’ reward for doing chores or some other task, this can be a fantastic way to help your child understand how money is earned and the tangibility of physical cash. In other words, it will make it easier for them to establish the link between cash and digital money down the track.

Another good idea is using cash to pay for groceries, just so that your child can visibly see the transfer of physical cash to pay for things. At the checkout, you can explain to them that having a job and going to work is how you earn money, for example – in the same way that they earn pocket money for doing chores – which enables you to then buy groceries for the family.

The value of money – needs versus wants

For children earning pocket money, understanding what their money can buy and can’t buy is an important one. Here, the lesson lies in your child realising the implications of their spending choices.

Kids learn a lot about money through observation, typically your spending behaviours, decisions and conversations. For instance, if they notice you making impulsive purchases or not considering the price of a particular product, there’s every chance they may struggle with developing their own good spending habits coming into adulthood.

When you’re out shopping, try saying things like ‘I don’t think we really need this’, or ‘the price is a little high, I might see if I can find it cheaper somewhere else’. In other words, teach them to compare one product to another, as well as the difference between the cost of a particular product and the value of the product.

The workings and benefits of a bank account

Kids love piggy banks. They can be a great way to get children started on the journey of saving and keeping their money safe. In saying that, though, managing money wisely requires more sophisticated tools, particularly in the real world.

The whole experience of going into a bank with your child and opening an account, talking them through depositing and withdrawing money and the various channels that can be used to transact their money can have a profound and positive impact. The same goes for taking them into a branch and depositing their pocket money, for example, or transferring it via internet banking or a banking app, and getting them to check their account balance.

Next time you pay a bill online or via your smartphone, consider involving your child and showing them how the money gets debited from the balance. This will allow them to comprehend terms such as like debit, credit, balance, transactions and ATM, etc. They’ll likely possibly find it interesting to see how your account’s balance changes based on your transactions and spending.

Budgeting and saving

You should also consider putting your child in charge of their own money early on – with your guidance, obviously. This can be a fantastic way to help teach them the importance of budgeting and saving.

Let’s start with budgeting. Say the school holidays are coming up and your child’s friends are planning an outing on one of the days. You could help them estimate the total cost of the excursion and how much spending money they’ll need on the day, and start budgeting for it out of their weekly pocket money in the lead-up to the holidays.

You should also consider discussing how a savings account can help your them child reach a particular savings goal quicker faster by showing them the importance of separating their ‘savings’ from their regular transactions. They can also name their savings account according to what they’re saving for, and you can help them set up automated savings transfers to their savings account, particularly if they’re receiving regular pocket money.

While your child may find the process of saving frustrating and slow, it’s important to refrain from helping them ‘top up’ their account. Instead, it might be worth creating some additional opportunities for them to earn some extra cash, for example.

Safety and security

In the digital age, protecting your identity has never been more important. When it comes to banking, it’s critical that you educate your child around the purpose of their PIN and password, and how best to protect them.

In terms of safety and security, there are a number of themes you should sit down and discuss with your child, just to help them get their head around everything. Here are some ideas to get you started:

Debit cards versus credit cards

As your child gets older, it’s important that they understand the similarities and differences between debit cards and credit cards – and the implications of credit cards, particularly around accumulating debt, interest and fees if they’re not managed properly.

Firstly, a debit card allows you to access the funds that you have available in your everyday banking transaction account – such as a NAB Classic Banking account – and can be used at ATMs and EFTPOS terminals. If your debit card is a ‘scheme’ debit card – a Visa Debit card or MasterCard Debit card, for example – they can be used for online purchases as well as at ATMs around the world, providing they accept Visa and/or MasterCard Debit cards.

Whilst they can also be used at ATMs, EFTPOS terminals and online, credit cards don’t draw on the money sitting in your everyday bank account. Instead, when you use a credit card, you’re borrowing money from the bank. And that means you have to pay that money back – together with any interest that’s payable on the amount borrowed. You may also have to pay fees, (like annual fees, late payment fees or cash advance fees) on a credit card.

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