Educating your children about finance
Parents want the best for their children. This doesn’t just mean giving them the best clothes, the latest toys or coolest gadgets, it also means laying the foundations for them to build upon to do well in life.
One of the key lessons every child needs to learn is about money – how to save it, spend it, earn it and invest it. Money skills can be a tricky subject to broach if parents feel they aren’t financial experts, however parents’ behaviour is the biggest influence over their children. Here are some helpful tips on how to help your child learn to manage money:
- Start early: The Money Advice Service suggests that adult money habits are set by the age of seven. Start as soon as they can count and make money the topic of regular family discussions. Choose a date close to a birthday or Christmas when they are due to receive a cash gift so that you can talk about saving versus spending.
- Want versus need: Although children will always want the latest game or toy, make them understand the difference between ‘needs’ and ‘wants’ to make sensible spending decisions. Reinforce how important it is not to spend more money than you have.
- Know the difference: Show your children that money can play a variety of roles such as spending today or saving for tomorrow. Use labelled jars to separate money – one for saving, one for spending.
- Instil a habit of saving: Along with learning financial skills, saving money teaches goal setting and planning.
- Learn from mistakes: When children have their own money, let them make choices and deal with the consequences. By taking responsibility for small amounts, allow them to make mistakes – it’s the best way to learn.
- Make it relevant: Enable children to experience using money on a practical level. Maybe use the weekly food shop to talk about planning, saving and finding the best value? Let your children hold the list and tick off each item or, if they’re older, give them a few items from the list to find on their own at the best price.
- Lead by example: Children tend to copy what their parents do, so limit the amount of shopping trips as a leisure activity before they begin to believe that spending is fun.
- Create Opportunities to Earn Money: Children need to have money of their own so they can learn how to make decisions about using it. Pocket money can accomplish that but parents should consider they do certain chores to earn their allowance.
Does your child’s school run a School Savers Scheme with their nearest credit union? This is great way to help them build financial foundations for the future. To find out more visit here.