Learning to manage our money is so important- we need it to keep a roof over our head, our bills paid and food in our cupboards. It’s a crucial thing to get to grips with in adulthood, but if you’re given the right advice and help earlier in life, you’ll do a much better job of it when it comes to managing it yourself. Therefore, teaching kids about money and how to handle it is key. They might learn maths at school but when it comes to finances, it’s something that’s often down to us as parents. Here’s how you can go about it.
Encourage them to earn their pocket money
One of the biggest issues when it comes to children and money is that they simply don’t understand the value of it. They ask for money as if it grows on trees, with no real understanding of the time and effort that goes into earning it. One of the most valuable lessons you can teach them from a young age is that money is earned. You can do this by allowing them to do age appropriate chores for their pocket money, rather than them receiving it as if it’s their right. Things like making their bed, feeding pets, laying the table and putting their toys away in the evening can be done even by younger children. Unfortunately, as adults we know that we have to do things we don’t want to, and spend our time working so that we have money to live. Understanding this concept from a young age can be useful for when they start gaining independence later on. When they start asking for money, you can remind them that you’ve had to earn it and work hard for it, just like they did with their pocket money. It helps them to understand that things don’t come for free.
Let them try out budgeting for themselves
It’s all very well telling children about money and budgeting, but there’s nothing quite like letting them try it out for themselves. One fun way to do this is to go on a day out, and give them a set allowance to spend. Encourage them to spend it wisely, planning for meals, drinks, treats and spending money. Will they budget, plan and be careful or will they spend it all in the first place? Once the money is gone, make it clear that it’s gone which might involve going back home early. It shows them how to use money in a real life scenario, and that overspending has consequences. Explain the concept to them, and have a conversation beforehand about what they might need to spend their cash on throughout the day so they can be prepared. But once they know the basics, let them make the decisions for themselves. They might not get it perfect first time, but it’s something you could try now and again over the course of the summer.
Create savings goals
Given the choice between spending and receiving instant gratification, or saving money for later- most kids are going to want to spend. So to encourage saving, you need to make it fun and worth their while. Once way you can do this is by creating savings goals. Have them pick out a toy that they really want, and each time they earn pocket money they can put it towards it. Help them break down their goal, work out how much they’ll need to put away each week, and then how many weeks it will take them to earn it. Once they’ve saved enough they get the joy of going to purchase what they wanted, and will appreciate it all the more. It’s a great lesson to learn, that if you’re patient and stick to your savings goal, you’ll eventually get what you want. You could even encourage them to spend a little and save a little, which can keep kids motivated as they get something now as well as something later. Let them decide how much they’d like to spend or save. Saving indefinitely with no goal in mind is no fun for kids and they’ll quickly get bored. So having something in mind that they want can help them get into the habit of wanting to save, and the rewarding feeling of it all paying off when they’ve reached it.
Teach them about finances
Credit scores, taxes, interest rates, insurance- there are lots of financial things that most of us don’t ever learn about until we’re much older. Why not start young, give your children an overview of these things so they have at least a basic understanding of them. It prevents them from leaving home and being thrown in at the deep end. There are lots of resources online to make these topics age appropriate.
Set a good example
One of the best ways to teach children about money is to set a good example yourself. Money worries cause significant stress, and while children won’t understand what financial issues are, they’re not stupid and if you’re worrying about money then they’re sure to pick up on that. Not all of us are lucky enough to be working with a huge budget, in fact, most families struggle to make ends meet at least some of the time. But being organised can give you real peace of mind and you know where you stand. If you’re in debt, do what you can to break the shackles. Take out a loan (or look into guarantor loans if your credit is poor) and consolidate everything into one place. If your finances are out of control, speak to a debt management company who can put you onto a repayment plan that works for you. Get yourself into the best position with money, so you can offer the best financial advice to your teenager as they get older.