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{This is a collaborative post}
Teaching your kids about money is one of the most important jobs you’ll ever have to do as a parent and it is incredibly important to tackle this topic from an early age as they'll begin building attitudes and habits towards money from as early as five years old. I still smile when my kids talk about being a pre-schooler and not being allowed a specific item of food as it wasn't a good price! All those shopping trips with me where I'd only buy cheese strings or yoghurt pouches if they were on special price obviously had an impact.
Getting used to talking about money and
personal finance early on can prevent your children from encountering financial issues
in the future. Many people start seeking the benefits of Debt Arrangement Schemes because of debt issues that may have been avoided
if they had learned valuable financial skills early on in their childhood.
Here are 10 tips to help your children
learn about money -
1. Make Saving and Giving a Family Value
Saving and giving should be part of every conversation with your children, including how to save and where to give when appropriate. Too many families encourage their children to spend and not to save and give. A nice idea is to let them start to responsibly manage their pocket money from an early age. For example, if they are given £5 a month, you might encourage them to save half of it, give a small percentage to a cause they feel passionate about and then enjoy spending the rest if they'd like.
Our family have always sponsored a couple of children in developing countries via Compassion and this has worked so well to help our children see how important it is to give to those less fortunate.
2. Help Kids Create a Budget
As your child gets a little older you can help them to create a weekly or monthly budget. It can include a contribution from their part-time job or allowance and then help your child to track their spending in a notebook or on an app. This visual reminder of what they are spending can help them to realise how quickly money can be wasted away or alternatively it can motivate them to save towards a larger purchase such as a phone or coveted trainers.
3. Model Saving and Spending
Appropriately
Don’t assume your children know the basics about how to manage money. They need guidance to delay gratification and understand the difference between wants and needs at every age. It is clear by the level of debt today that many adults still don't have a clue how to manage their money and a realisation that it is better to save up and buy an item outright instead of constantly taking credit that you may not be able to repay. It's good to model this to your children and they can see the excitement of buying a large item once you have saved up and have the sense of achievement of being able to buy outright the new car, sofa or whatever it is you need.
4. Teach Kids About Saving for
Non-Essentials
Saving is an important step in becoming a financially conscious
adult, and kids should learn this at a young age. Set them up a savings account with your local bank or building society and when they receive birthday or Christmas money let them see it being put away in their savings account and they can watch the amount increase. It is great to have conversations about what that amount of money could buy as this will increase their awareness of the true cost of things.
When it comes to big purchases, give your children a chance to have a say in saving for these items. If they participate in the process, they’ll feel more ownership over their goal and be more committed to accomplishing it.
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5. Give Your Kids Allowance They Can
Spend
Allowance shouldn’t just be extra money you
can give them when they don’t need to buy essentials. Rather, children need to
know how much they’ll get and when so they can plan their spending accordingly. Some parents choose to give an allowance that they buy all their toiletries, clothes and stationery from as well as the little luxuries that they don't need but desire.
When giving your kids an allowance, you could also give them the opportunity to earn more (or less) money depending on the responsibilities they’re willing to take on. You can price up different jobs to allow them to work for the treats that they want.
6. Teach Kids the Difference Between
Saving and Investing
Saving and investing are quite different concepts and most children won't get involved in investing, but there is no reason why not if they have a little extra money to play with. My 18-year-old has recently made the decision to buy some shares and to track the market to teach himself some investment skills. If you are experienced in managing investments this will be an invaluable tool to pass on to your children.
7. Teach Them About Saving for
Retirement
By teaching your children about saving for retirement early on, you’ll be helping them develop good habits and ultimately their future financial security. My husband started to pay into his first pension when he was 18 and that was from his part-time job. This is such a great example and he now has a very healthy pension pot ready for this retirement.
It's especially important for females to start paying into their pension as soon as they can as they are more likely to experience periods of no work whilst having or caring for their own children. No one should rely on a state pension nowadays, it is important that we are all paying into a good plan ready for the future.
Follow these tips to start teaching your children about good money management. It’s never too early (or late) to start this important
conversation. Financial literacy is one of the most important life skills a person
can have, and it’s up to parents to help teach their children the basics. These seven tips should provide you with a good starting point, but be sure to explore
other resources as well. The more you teach your kids about money, the better
off they will be in life.
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