With the expense of funding your child’s return to school, now is the time to help your children to learn the value of their own moola.
So before they blow their pocket money all in one go, it might be time to think about teaching them about money. Helping your kids develop good financial skills from an early age means they’ll be ready for the financial challenges of adulthood.
Showing children the basics such as how to budget, spend and save will establish good money habits for life, and the sooner you start the easier it can be.
Here are ten ways to help them understand that money doesn’t grow on trees, and needs to be carefully managed.
Take time to explain
Mum and Dad are not being mean when they say no. Some things are too expensive, even if all their friends have them. Talk through your shopping choices explaining how you make decisions about what is and isn’t good value, and how you don’t have everything you want, either… Once they understand that money is limited, things become easier.
Get your child familiar with money
Some parents worry about exposing their children to money too early because they want to protect them from adult pressures. But helping your child to understand and respect money from an early age will help them manage it better when they become an adult. Start by letting your child see and handle notes, coins and cards, so they become familiar with money as a part of everyday life.
Let them have the experience of buying sweets with you, to understand how shopping works.
Give them regular pocket money
An allowance makes more sense than cash on demand. This helps them understand that money is always finite, and to learn to budget. Making pocket money conditional on doing chores like washing the car may seem like sensible preparation for the world of work, but it can lead to children expecting cash for doing anything to help, and is hardly conducive to a happy atmosphere at home.
Explain the concept of saving (but don’t expect them to do it)
Saving can be hard for smaller children. They tend to live in the moment, rather than plan for the future. Sooner or later they will start to understand that a new bike means going without sweets every day, but some find it harder than others.
Helping them with saving for something big can make the process more fun.
Tell them where money comes from.
Children see us get cash out of machines, and assume that is all there is to it. Tell them that the bank only lets them take money out because they have already put it in, and it starts to make more sense to them.
Explaining how you get the money in exchange for working makes it easier still.
Encourage them with their maths. Research from the US shows that children who were not good at maths were also likely to be more anxious about money. Seeing how money adds up (and what happens when they spend it) can help them start to understand the principles of managing money.
Making money go further
Once children can manage money, the next skill is to make it go further. Get teenage children to plan a budget for something they want to do. By showing them how to look at all the costs in advance, and help them shop around, and they will be delighted to find they can make their money go a lot further.
Once they learn basic budgeting through direct experience, it’s there for life.
It’s not just coins and notes any more. Money went digital some time ago, and children need to understand that virtual money on their phone or elsewhere on line has to be earned in the real world.
Start the serious savings habit. Once children start to understand about money and saving for things they really want, you should try and get them saving seriously – with that first car and first home in mind.
There are many products suitable for children and young people, including the Children’s ISA. To find out more about them please contact the savings team at Continuum.