Teaching kids about money
Teaching kids about money can be a rather daunting job as money is pretty important for our general everyday existence. The sooner we learn how the real, money-driven world works, the better we will eventually be at staying on top of things. In the modern-day world, children learn about many things that schools emphasise are highly important for everyday life. However, the responsible handling of money is yet to make the cut of subjects that are considered vital to the relevant education of children.
Then there are some subjects – such as algebra – that teachers tell us are vital but are never really used in general day-to-day living (unless you’re wanting to become a professional mathematician, a civil engineer or an algebra teacher). Realistically, how many of you, in your adult life, have ever actually needed to know the value of X?
School students invest so much time into educating themselves on these seemingly unnecessary subjects when some of that time could be used teaching kids about money skills such as paying taxes, budgeting, and being responsible with cash in general. Although, when heading to university, students are able to choose their course of study more freely, there are some certain skills that would benefit them even before entering university, had they learned them at school.
We’ve put together a bit of a Q and A for the important money lessons we all eventually learn in life, sometimes the hard way. As traditional schooling methods can change slightly over the years, we were sure to check in with our Year 7 superstar, Georgia Conrad-Czaja, about what she thinks kids should be taught about money as well as what she has learned herself.
Teaching kids about money
How should kids earn money fairly?
Georgia believes that, when it comes to teaching kids about money, it’s really something that should come from the parents. This is also a cool way for kids to earn themselves some money, especially if they’re not old enough for a part-time job. Parents can give their children household jobs such as mowing the lawn, doing the ironing, or washing the car, in exchange for pocket money. This helps with teaching kids about money and the concept of earning money rather than expecting it. If they don’t do the work, they don’t get paid. Plus, it also crosses a few things of Mum and Dad’s to-do list.
This is great for teaching kids about money and the importance of working for their money. Plus, it will likely allow them to appreciate the money that you give them a lot more as it is something that they have worked for instead of just being handed. Now, we’re not talking about child slave labour here. Parents can simply set easy chores aside for their kids to do during the week or over the weekend. As we mentioned, things like mowing, ironing, cleaning, or even cooking, are great and completely doable jobs for kids to earn a few bucks.
Teaching kids about money: Things they should know
Teaching kids about money: What are loans and how do they work?
When teaching kids about money, it’s important for kids to be educated on all types of available credit as there will likely come a time in their life when they will want to go on a holiday they can’t afford, buy a new car or buy a house. Therefore, teaching kids about money as well as what types of credit are available and how the concept of borrowing works will help make stressful financial times a little less stressful for your kids.
Essentially, a loan is a sum of money that a person or company can borrow from an individual or a lender when they are in need of credit. The borrower will be given a certain timeframe in which they must repay their loan. There will also generally be a set cost of borrowing the loan which could include things like an establishment fee, Annual Percentage Rate (APR) and any additional charges associated with that type of loan. However, each different type of loan will come with different costs, terms and conditions.
The different types of loans include:
- Student loans (Know as HECS is Australia)
- Home loans (Also known as a mortgage, pay it off quick!)
- Auto/Car loans
- Personal loan
- Small business loans
- Payday loans
- Loans for veterans
- Borrowing from retirement and life insurance
- Debt consolidation loans
- Borrowing from friends and family
- Cash advance
- Home equity loans
Teaching kids about money: What is a stock market, why do so many adults invest in it?
The stock market refers to the place where shares of publicly listed companies are traded. Essentially, it’s a group of buyers and sellers who trade ownership claims on businesses. If you are buying a stock (an ownership certificate of any company), it means that you have a certain share in that company and can make money off its performance.
Adults invest in the stock market for two main reasons:
- Dividend Payments: This is when the company gives some of its earnings to stockholders. This means that if you buy shares in a well-performing company that earns a high profit, your return on the shares that you bought could be fairly significant. Essentially, investing in the stock market is a way for educated buyers to make money.
- Capital Appreciation: This occurs when a stock’s price increases. It refers to the rise in the value of an asset based on a rise in the market price. So, if you were to buy a stock for $10 and a year later that same stock is trading at $15, you would have a return of $5 from capital appreciation. Therefore, as the price of your purchased stock increase, so does your return.
Teaching kids about money: What age can people start buying shares in a company?
Firstly, stocks and shares are essentially the same things. They both represent shared ownership in a company. Therefore, buying a share in a company just means that you are investing a certain amount in that company’s assets and profits. The more you invest, the higher your returns will be as long as that company continues to make profit.
The age in which you can legally buy shares for yourself or others is 18 years old. However, if you wish to enter the stock market before the age of 18, your parents or other family or friends can invest in some for you and transfer them into your name once you are old enough.
Teaching kids about money: How do you do your own taxes?
If you are an Australian resident for tax purposes, you will have to start paying tax as soon as you are earning more than $18,200 a year. The tax that you pay from your income or company profits represents a compulsory contribution to state revenue that is levied by the Government.
At the beginning of every new financial year, you are expected to lodge a tax return for the previous financial year. Lodging your tax return is essentially just a submission of your income and personal circumstances that the Government then assesses to determine your tax liability: whether you have paid too much tax or not enough. Then, you’ll get sent your tax return statement which will outline whether you owe tax to the Government or the Government owes tax to you. Naturally, the latter is always preferred.
Once it is time for you to start lodging your own tax return, knowing what to do will save you time, confusion and possibly money. Sure, you can throw some money to an accountant to do it for you. However, why pay someone to do something that you can do yourself for free?
The easiest and fastest way to lodge your tax return is online using myTax. To do this you’ll just need to set up a myGov account and link it to the Australian Tax Office (ATO). As a first time lodger, you’ll need to:
- Know your Tax File Number (TFN)
- Create your myGov account
- Call the ATO to provide additional information to receive a linking code (TFN, date of birth)
- Sign in to your myGov account and link it to the ATO using your linking code.
Then, the ATO will automatically complete some of your tax return form by using information from employers, banks, health funds and government agencies as well as your ATO account activity and any previous tax returns (if applicable). You’ll just need to fill in any missing details and fix any incorrect ones.
If your work requires you to cover any expenses that should otherwise be covered by your employer, you may be able to claim these expenses as tax deductions. This means that you may get a percentage of those expenses back with your tax return. You can keep track of these expenses by using the Government app, myDeductions. The app then allows you to upload your records directly to myTax when lodging your return.
Teaching kids about money: How kids can save money smartly
As a parent, one great way to help teach your child how to save and spend wisely is to spread their pocket money out to every month then allowing them to spend it how they please. So, once a month you’ll give them what they’ve earned and it’s up to them to make it last the full month. If they spend it too quickly, be sure not to crack and offer them more or buy them something that they should be buying themselves. This will teach them how to plan out their spending so their money lasts until the next payday.
This is how Georgia’s parents taught her to save money and here is her example:
“Monthly I receive a specific sum of money: $50, for example. I then split my money into three categories; SPEND, DONATE, SAVE. Of course, I don’t want to spend all my money, so I take $25 and put that aside as the money I would like to spend that month. Now I must decide how much I want to donate and save. I will save $20.00 and donate $5.00.”
“As the end of the month approaches, I donate that sum of money to a local charity. Not only does this make you feel good but it also helps an animal, person or company in need. If at the end of the month you have some money left from your spending category, you can either choose to donate or save the money. For me, personally, the best thing to do is to carry it over into the next month. This means that if you only spent $20.00, you would have an extra $5.00 for the following month, which you could either spend, save or donate.”
Main money concepts for teaching kids about money
- Earning – you must work for your money
- Saving – not spending money immediately so it can be used for future purchases
- Spending – using money wisely to get something in return – always looking for the most value for money
- Opportunity cost – a benefit or value of something that must be given up to gain something else – the difference between needs and wants
- Budgeting – allocating what their money will be used for
- Investment – something you buys or put into to potentially gain more money in the future
- Borrowing – the concept of borrowing credit and paying it back at a higher cost without damaging their credit score
- Tax – the importance of always do their tax and being honest about their earnings
We’d like to hear from you!
If you have your own methods of teaching kids about money – as a teacher or a parent – we would love to hear from you! Send us a message via our Facebook page or shoot us an email at email@example.com.
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Small Personal Loan
Up to 20% Establishment Fee
+ monthly fee up to 4%
Jacaranda Finance does not charge an annual interest rate on SACC loans. These small amount loans incur 'fees' instead of interest. The maximum comparison rate on our loans between $300 and $2000 is 199.43%.WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate
Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.
Loan Amount of $1,000 over 12 months repayable weekly (50 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $480 (fees based on 4% per month over 50 weeks) = $1,680 total repayable in 50 weekly installments of $33.60.
Medium Personal Loan
Annual Percentage Rate (APR) starts at 20.56%
Comparison Rate is 20.56% per annum.
This comparison rate is based on a medium amount credit contract of $2,500 repaid over 2 years with a $400 establishment fee and APR of 20.56%.WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate
Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $555.83 (reducing interest*) = $3955.83 total repayable over 18 months with weekly installments of $50.71.
Loan Amount of $4,500 over 24 months repayable weekly (104 weekly repayments). $4,500 (Principle Amount) + $400 (Establishment Fee) + $1081.85 (reducing interest*) = $5981.85 total repayable over 24 months with weekly installments of $57.51
Large Personal Loan
Annual Percentage Rate (APR) is 12%
Comparison rate is 19.88% per annum.
Loan Amount of $5,000 over 18 months repayable weekly (78 weekly repayments). $5,000 (Principle Amount) + $1831.16 (Interest) = $6831.16 total repayable over 18 months with weekly installments of $87.57.
Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5041.72 (Interest) = $15041.72 total repayable over 24 months with weekly installments of $144.63.