Being a parent can be wonderful, but it isn’t always easy. And talking to children about money is a particularly daunting prospect – especially if your own money management skills are a little less than perfect.
Humans form financial attitudes by the age of eight (yep, really), and there’s no guarantee that your children will learn what they need to about money in school. You’re the best teacher they have, and while you might not be Warren Buffett, we reckon you’re pretty great.
The main starting point: healthy habits and solid common sense. Passing these on will pay off enormously, helping the next generation to sidestep expensive debt and save for the future. The sooner your kids start to see what ‘healthy’ money management looks like, the better.
But there’s no point pausing Peppa Pig to explain interest rates to pre-schoolers: this will be met only with justified howls of rage. Your wisdom has to be age-appropriate, and at the earliest ages, you can lead by example; make a display of budgeting, saving and spending so the lessons go in deep.
Primary school children can get to grips with money – literally – by counting out coins and notes; talk to them about the different sizes, colours and numbers. Explain that money is what we use to pay for things. Tell them how much stuff costs to give them an idea of “value”, and demonstrate that money can be “cashless” by showing them your debit card in action.
You could also try giving your kids an allowance and a “pay by chore” model. Once you settle on the amount, don’t be tempted to give handouts, no matter how fiendishly your kids chip away at you. Get them involved in setting up a savings account and coax them into squirrelling away at least ten per cent of their allowance. Discuss their spending goals too – what do they want to buy and how much would they need to save?
Secondary school kids should graduate to a monthly allowance and the use of budgeting apps. They may move away from paid chores into real part-time jobs to understand the world of work. Get them to help you by finding the best deals on your weekly shop and utility bills. Any child going into higher education also needs a serious chat about easy credit; an overdraft isn’t an invitation to spend. Make sure teenagers are already in the habit of budgeting, getting good value and saving (what they can) before they buy that miniature fridge and head off to university.
Follow these guidelines and who knows? Maybe in due course, they’ll be the ones teaching you a thing or two about money management.
Apps and resources to give you a helping hand:
- Osper Link opens in a new window is a good option for older kids, because it provides a physical debit card, as well as a budgeting app that your kids can download, and parents can also easily deposit money into their children's accounts by downloading the app themselves.
- Topmarks.co.uk Link opens in a new window is a good source of interactive money games to educate children about money. The Fantasy Stock Exchange turns investing into a fun competition with prizes for the shrewdest young virtual traders (although no real money is invested, so there is no risk that your children will accidentally gamble their pocket money away).