In collaboration with MoneyPlus¦ It is important to teach your children about money from a young age. Teaching them skills such as saving, budgeting and managing debt will give them essential life skills, help them to be financially independent and cultivate good financial habits.
A recent survey by debt advice providers MoneyPlus has found that while people generally think that people become more financially secure as they get older, that isn’t always the case. In fact, it suggests that Gen X (aged 45-60) are currently the most financially strained! However, Millennials (aged 29-44) were the most likely to have debts and use Buy Now Pay Later methods such as Klarna. Over 60% of respondents (across all ages) were likely to have sacrificed a holiday due to the expense. The data indicated this could in part be because of people spending more on celebrating others life events such as baby showers and hen or stag dos, with social media influencing these milestone events to become increasingly elaborate in recent years.
One thing is for sure – as parents it is largely our responsibility to try and make sure that the generation we are raising have a good financial head on their shoulders. My 8 year old daughter is heavily influenced by YouTube adverts and currently has no concept of the value of money, so I am working on teaching her about the following:
1. Earning Money
If you reward children (toddlers upwards) for chores such as tidying their room, it helps them start to understand the value of money. Additionally, when my daughter and I go shopping and she wants something, I tell her how long I have worked to earn the amount of money it’s worth.
2. Saving Money
I often say to my daughter when she sees something “You could buy that, or you could save and buy [whatever more expensive thing she’s had her eye on recently]”. A combination of this and helping them to save money in a piggy bank will help them to understand how you can’t always afford everything right away. They will learn how saving instead of spontaneously splurging is important.
3. Spending Money
You might not always approve of what your child decides to spend their money on. They might decide something you think is rubbish is worth it. They might decide to splurge instead of saving. However, giving them the freedom to make decisions about how they spend their own money will help them to understand its value and help them learn from their mistakes if they later regret their decisions.
4. Needs Vs. Wants
Even as an adult, I often remind myself to think “Do I need this, or do I just want it?” Needs vs. wants is important to learn young, as it can stop you from overspending at any age.
5. Budgeting
Children are often focused on right now rather than the future, so it might help them to think about their budget. They could plan out what they want to spend their money on over the course of a month. Alternatively, they could have separate money boxes or jars for different purposes (e.g. one for smaller things like lollies and chocolate bars and one for saving towards larger items like video games).
6. Understanding That Electronic Money is Still Money
It’s so much easier to spend money when it’s not physically there in front of you. To help your child understand that electronic money is still money, you could put their pocket money in a child’s debit account instead to help them learn this.
7. Banking
Help your child to understand banking by including them in your visits to the bank. When they reach their teens, they can start going to the bank for deposits and withdrawals. Once they need to start using banks on their own, the paperwork and general experience will seem a lot less intimidating if they’ve grown up with it.
8. Interest
While they’re learning about banking, teach them about what interest is and how it works. Explain how this can increase their money or their debts. You could put an agreement in place to pay X amount of interest when they save X amount of pocket money. This has the added bonus of encouraging them to save more!
9. The Importance of Emergency Funds
Talk to your child about situations that can arise in daily life where you might suddenly need a lot of money. For instance, if your car broke down. Explain the importance of needing emergency funds for situations like this, so that you can afford car repairs. Bonus points for mentioning something that resonates with them, like the fact they’d have to walk to school every day instead of getting a lift!
10. Taxes and Mortgages
I always think that taxes and mortgages should be part of the curriculum. Kids will be better prepared for adult life if they know the basics of taxes and mortgages before they need to know about it.
Cover photo by cottonbro studio: https://www.pexels.com/photo/little-child-playing-with-coins-on-floor-7118205/