The first step to teaching your child about money

Did you know that over a third of 16 years olds don’t have a bank account??? It’s true! And it’s amazing.

 

 

The average 16 year old in Australia has been getting pocket money for 10 years (half of them, even longer). And two thirds of them having been receiving an extra $255 a year in “bonuses” for presents and awards on top of that. That’s a WHOPPING $1.4 BILLION a year – and over a third of that goes to someone who doesn’t even have a bank account!

Given that the average Australian child gets $528 in pocket money each year (and then a bonus on top of that), I think we’ve wasted a huge opportunity to teach our kids about making and saving money.
How can we expect people to understand that if they had put away half of their pocket money since they were 6 (the average age a child starts receiving pocket money) they could have saved $4,491, even before interest?

 

And if they don’t know how much they could have saved, it would be even harder for someone to know the power of compounding interest.

 

If we helped our children open an account and put half of their pocket money into it, it would look like this:

 

 

 

Pocket money and rewards

Put half into account

Account balance at start of year

Interest earned     (based on 4%)

Account balance at end of year

Age 6

626.28

313.14

391.50

Age 7

621.08

310.54

391.50

15.66

717.70

Age 8

621.08

310.54

717.70

28.71

1,056.95

Age 9

621.08

310.54

1,056.95

42.28

1,409.77

Age 10

846.24

423.12

1,409.77

56.39

1,889.28

Age 11

846.24

423.12

1,889.28

75.57

2,387.97

Age 12

846.24

423.12

2,387.97

95.52

2,906.61

Age 13

988.72

494.36

2,906.61

116.26

3,517.23

Age 14

988.72

494.36

3,517.23

140.69

4,152.28

Age 15

988.72

494.36

4,152.28

166.09

4,812.73

Age 16

988.72

494.36

4,812.73

192.51

5,499.60

 

Average pocket money source Commonwealth Bank

 

 

And in the meantime, would create an invaluable lesson in saving, delayed gratification and setting savings goals.

 

For a child under the age of 16, a parent had to consent to them opening an account, which means if you’ve never done that, they don’t have one. (Don’t worry, if you haven’t you’re not alone – according to a study done by Commonwealth Bank only 56% of parents have done this)

 

So if they don’t have one – start now!  Start teaching your kids about money from an early age, so that good money habits are taught as much as the habit of them brushing their teeth.

 

Here are five places that can help to get you and your child started with a youth bank account (please note these aren’t recommendations – but are here to help you find one that suits):

 

 

Commonwealth Bank Youth Saver Account

Westpac Reward Saver – under 12

Westpac Reward Saver – 12 to 21

Suncorp Kids Saving Account

ANZ Progress Saver