Children learn most of their life-skills from their parents – tidying, cooking, helping old ladies across the road – but money management is often hidden away. Not necessarily by design, it’s more that you don’t announce that you’ve made your monthly credit card payment or you have an appointment with Credit Fix – you just get on with it.
There’s also the famous British reticence about money, so parents often don’t discuss debt, savings and salaries with children. This doesn’t mean missing out on instilling good money skills, though; it just has to pitched right, according to the children’s ages. Here’s how it’s done.
Talk about money to your children as soon as they can count. Don’t bombard them with your stocks portfolio just yet though! Give them some coins to take to the shop to buy something, then see how much they have left.
If they always get money from someone for birthdays and Christmas, talk about what they can do with the money; whether they want to save it or spend it. Is there a toy they want that costs more than the gift? Can they wait for the next gift so they can afford it? Highlight the difference between saving and spending.
Discriminate between wants and needs
Kids want everything they see, now! However, they don’t need 90% of it. Teaching the difference between wants and needs is vital if your kids are to make sensible spending decisions. They want to blow their £5 on sweets, but they might need a particular book to complete a set. The sweets will be eaten, but the book will carry on giving.
Talk to them about earnings
Junior really wants that new £50 PS4 game and you’re the walking, talking money tree, so cough up. If your hourly rate at work is £20, explain how you must work for 2.5 hours to earn that amount. You don’t just magic up money, you work for it!
Say no once in a while
It’s not actually fatal, despite what the kids might say. A simple “No, it’s too expensive and we have to save for the holiday/new car/Christmas,” will do. Don’t say you can’t afford it though, as this may make your kids worry that you’re not in control and you don’t have enough money. Always qualify the refusal with a positive reason, like saving for something good.
Differentiate between spending money, saving money and charity money
Money has lots of different uses, so when you hand over pocket money, use coins rather than notes and encourage the kids to divide it between a spending jar, a savings jar and a charity jar.
This shows it’s ok to spend some money, as long as you save some and use some to help others. Once they have a bank account, they can replicate this jar system. It’s also vital to start off with cash and then introduce the idea of virtual money.
Let them make mistakes
Once it’s gone, it’s gone! If your children blow their pocket money on cheap tat and sweets, they’ll have to wait until next week or do some extra chores to get more. It doesn’t just come to them, they have to wait and/or work.
Set a good example
You’re the main influence on your children, so make sure they see you looking for BOGOF offers, paying your phone bill, deciding not to buy something on impulse and checking on your savings account. Don’t always take them shopping to cheer them up, either, as this will set a dangerous precedent.