Teaching your children about money
Children love to spend, spend, spend, and quite often, they don’t seem to grasp the value of money.
Teaching children about the value of money is something all parents go through. Opening a junior ISA into which you pay a set amount each month toward a long term savings goal (see Wealthify for more information) is one way to introduce your child to future financial planning. But you might need some other shorter-term ideas too.
Set an example
Children are like little sponges. They soak up everything around them. Every scrap of information is processed and stored. That’s why teaching your children about money starts by setting an example. There are two things to consider.
First, if you are the type of person who enjoys perhaps more than the average amount of retail therapy, your child is likely to notice that you visit shops most days and that you are always handing over your credit or debit card. This is going to create the impression that money is something casual and fast and seemingly in endless supply.
Second, if you are stressed by money, and if you are always talking about it in front of your child, the impression that money is hard to control may be imprinted, which could lead your child to believe that money trouble is just a part of life and must be accepted.
Setting an example now is worth your efforts.
Give them a real-world example of spending their own money
This is going to take a day or two to see through to the end. Hand your child a small amount of pocket money, and have them save it in their room. A day later, take a trip to a place where your child will be spoilt for choice on how to spend their money. Make sure toys and games and ice cream are on offer. Each time they show an interest in something, invite your child to spend their own money on it, saying “but once it’s gone, you can’t get anything else”. This is going to make them think twice before they purchase a toy they don’t really want.
Now it’s time to switch from pocket money to commission
Once the initial amount of pocket money has been spent from the tip above, explain to your child that they can earn more money by helping out around the home with chores. Simple tasks like sweeping the floor or tidying their room are suitable for younger children, whereas older children may be trusted to complete age appropriate chores like taking the bins out, folding laundry, or loading and unloading the dishwasher. This exchange of work for cash is going to give them all the more reason to think twice about spending their hard-earned cash.
Teenagers & bank accounts
When your child is old enough to appreciate how money works on a slightly more advanced level, you may wish to look into opening a bank account for them. By paying their ‘commission’ money directly into their account, you will reduce the amount of cash they keep in the house – which in turn, will hopefully make them more thoughtful about their savings!