How to teach your children smart money habitsHow to teach your children smart money habits

Teaching your children about money imparts an important life skill, but what does it look like in practice? Long gone are the days of stuffing coins into a ceramic pig!

For modern Australian families, a robust financial education includes both fundamental concepts like saving and budgeting, as well as an understanding of the long-term potential growth of investing.

This guide will help you bridge the gap from simple pocket money principles to teaching your children the powerful concepts of wealth-building. Let’s dive in.

Laying the foundation: Money lessons for young children

Financial education starts with daily experiences. This is where we teach kids about the day-to-day management of money for living. We’re talking bills, groceries, and the like—not overly fun but important. 

Here are a few ways to lay those financial foundations. 

1. Differentiating needs vs wants

Differentiating needs vs wants is fundamental to financial literacy, as it teaches children that money is a limited resource that requires allocation based on priority. 

To illustrate this, parents can use everyday examples, such as household bills or purchases, to distinguish between necessary expenses (like food or shelter) and nonessential spending (like toys or treats).

2. The three-bucket strategy

The three-bucket strategy can be a useful method for educating children about budgeting and goal setting. This method involves separating incoming funds into three distinct buckets: 

• Spending: For immediate use in the short-term

• Saving: Reserved for any short to medium-term goals

• Investing: For long-term growth and the future

3. The time value of money 

When setting aside money for your child as early as you can, they have the opportunity to benefit from compound returns.

With compound returns, not only do you earn returns on the money you invest, but also on the reinvested returns (such as dividends) that money might earn over time.

Because time is the biggest factor here, starting young provides the longest possible runway, which is a key contributor to long-term financial growth.

Practical habits for teaching investing

It's easier than you think to weave investing lessons into what you're already doing as a family—all it takes is being open about some of your own money moves.

Take your children on the investing journey

Skip the private transactions and make investing a shared experience. The beauty of Sharesies Kids Accounts is being able to include them in the investing journey; show them what you’re investing in and how you do it. 

This early peek behind the curtain starts the habit, helping build financial familiarity and opening up opportunities for discussion.

Keeping tabs on the money

The next step is simply watching what happens. Tracking the market helps teach kids that investments go up and down and that's completely normal. If the balance takes a dip, don't panic. Instead, use it as a learning moment to chat about how investing works. 

This helps them understand why it's important to think long-term instead of worrying about short-term dips.

Put investing on autopilot

A low-effort way to help your kids build a long-term investing habit is to automate it. With the likes of auto-invest, you set the amount and frequency to invest, and it’ll take care of placing the orders.

By putting the same amount in every time, regardless of what the market is doing, not only are your kids building a good financial habit, they’re putting dollar-cost averaging into practice. 

This consistency isn't just about good discipline—it's about making sure their money gets the maximum possible time in the market to grow.