Money management is, sadly, not one of the subjects taught in schools. As a result, most of us have to learn it the hard way. Which can be expensive if we make a mistake.
At Continuum we believe that money management skills are vital, that if we are parents it is our responsibility to teach financial wisdom to our children – and that it’s never too soon to start to start.
Like all education, teaching money management is easiest if you give the child lessons appropriate for their age, and ensure that it is fun.
So, for the youngest children, money management starts simply by having money. It’s great for teaching counting, and young children can learn a lot simply by playing with cash.
Even young children can also get used to the idea of spending money. They watch you shopping. Doing the same with a pretend shop makes the real thing child’s play – literally.
By the time they have started school, you can give them pocket money. First time into a real sweetshop is always an adventure and even if they need some help at first, most soon grasp the idea of giving more and getting change.
But they can also discover they have a choice of how they use their pocket money. They can spend it on something small or get used to the idea that if they don’t, they can save it for something bigger. Can they buy a computer game with a pound? Obviously not – but they can buy it when they have saved enough pounds?
You have just introduced the concept of savings.
Keeping their money in a glass jar where they can see it might be a good idea. That way they can see it grow, which provides a great visual reminder of the benefits of saving.
If children have to work for pocket money by such demanding tasks as clearing their room or laying the table you demonstrate that money has value based on work, rather than magically appearing.
Once they get used to using their pocket money to buy things, you can explain about online deals, coupons, offers, and price comparisons. Let them check out the different prices at the different shops. It is a good way to show them the power of managing money – that they can buy more of what they want if they use it well.
Once children have grasped the idea of saving, it is time to help them arrange a savings account, where their money will earn interest. This is ideal for reinforcing the benefits of saving – children can watch their money grow online – and perfect for relatives who are at a loss at Christmas and birthdays.
A gift of cash is dull for younger children, but it can be the ideal present once they have the saving habit.
By the time they have reached secondary school children should be able to understand most of the concepts used in everyday life. Savings, the need for currency exchange during the family holiday, and even the concept of credit should all be understood.
So too should the idea of interest earned on savings or charged on loans. Making a game of finding the best deals can build their confidence and familiarity.
The teenage years
As they turn from children into adolescents, your offspring should have acquired all the skills of everyday money management. With the savings habit established, some will be keen to start looking at investments. Transferring savings into a Junior ISA might be a simple way to get started.
But at Continuum, we believe there is a lot more for them to discover. Mortgages, taxation, longer term investments and pensions. It is actually rather exciting for people of all ages to discover new ways to make the most of their money.
They will certainly need more answers as they enter the world of work and start thinking about buying a first home.
We want to help, and we have a wealth of resources to help your children (and you) build your financial expertise. Subscribing to our free educational newsletter and dipping into our growing library of financial information could be a good place to start.
If you or your offspring have specific questions, we are always ready to help. Simply call the Continuum team.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.