4 May 2020
Teaching children about money isn't currently on the UK school cirriculum, which results in young adults entering a surprisingly complex financial world without the tools necessary to survive and thrive. Even if your children/grandchildren are very young, remember that the sooner you start teaching them money and personal finance skills, the more adept they’ll be at applying those skills when the time comes. They may even treat you with their hard earned savings.
1. COMMUNICATE WITH CHILDREN AS THEY GROW OLDER ABOUT YOUR VALUES REGARDING MONEY
Financial lessons – how to save money, how to make it grow and, most importantly, how to spend it wisely –must be age-appropriate to be meaningful and beneficial. Young children are not miniature adults. Lessons should be tailored for their age, rather than just made simpler. Start as soon as they are able to count, and make money the topic of regular family discussions. Time these around dates (for example, a birthday or Christmas) when they are due to receive a cash gift so that you can talk about saving versus spending.
2. HELP CHILDREN LEARN THE DIFFERENCES BETWEEN NEEDS, WANTS AND WISHES
Help your children avoid spontaneous purchases by setting goals and prioritising what they spend their money on. This will prepare them for making good spending decisions in the future. While a child will naturally ask for the latest games console, making them understand the difference between needs and wants will help them make sensible spending decisions from a very young age. If they want the latest X-box console that costs nearly £300, explain how long it would take an adult to earn that amount of money. Create a specific example to put it into perspective.
3. SETTING GOALS IS FUNDAMENTAL TO LEARNING THE VALUE OF MONEY AND SAVING
Help your children to set a goal and track their savings and their spending. Young or old, people rarely reach goals they haven’t set. Nearly every toy, latest pair of football boots or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves. A great way to visualise goals for children is to create a savings chart you can display somewhere prominent (for example, on the fridge). Create a table and put a picture of what they are saving for. Then, each week, they can colour in the box as they move closer to their savings goal. That way, they can track their own progress easily by simply counting the number of boxes filled in, to see how much they have saved up to that point and the number of weeks still to go.
4. INTRODUCE CHILDREN TO THE VALUE OF SAVING VERSUS SPENDING
Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home. Children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they will also realise that the quickest way to a good credit rating is a history of regular, successful savings. You could even offer to match what your children save on their own.
5. WHEN GIVING CHILDREN A ‘POCKET MONEY’ ALLOWANCE, GIVE THEM THE MONEY IN DENOMINATIONS THAT ENCOURAGE SAVING
Providing pocket money in lower denominations makes it easier to allocate a proportion of income to different goals. Labelled jars work to separate money – one for saving, one for spending and one for donating. Any time they make money by doing chores or receiving birthday gifts, encourage your child to divide the cash equally among their jars (or maybe plastic Tupperware for safety reasons). It’s not a huge act, but it does show that it’s okay to spend some money, as long as you’re saving as well. Once they’re older, their bank and investment accounts can mirror the split. Keeping good records of money saved, invested or spent is another important skill young people should learn.
Hopefully this article will help give you some lessons for the kids that they arent taught at school.
To discuss the different saving and investment options for your children or grandchildren, speak to us for further information on 01786 431703 or email us at email@example.com