How to help your kids learn about money!
Money is a big issue for most of us today. And many people wish that they were better with money.
But developing good money habits starts early. Try to think back about where your own attitudes to money came from? At what age did you start having money; and did you have any idea about how to manage it well?
Research shows that by the age of 5, many children have already started developing their attitudes and habits towards money. And these attitudes and habits can become ingrained by the time they are 7.
So it’s never too early to help your kids learn about money. And never too early for them to start to save money. Whilst they will learn about money at school, it’s also important to teach them at home.
After all, don’t you want your kids to grow up being better with money than you are?
In this article we take a look at ways you can help your child develop good money habits, including how to save money.
Five lessons to teach your child about money
If you can help your child understand the following lessons about money, you will be giving them a strong foundation for their financial future:
Lesson 1 : Everything costs money
This is a good place to start. Even very young children can understand that when you are in a shop or cafe or entertainment venue, money changes hands. Even events that are free are likely to involve some kind of spending along the way.
So whenever you are out and about and need to spend money, encourage them to look at the prices with you and understand what you get in return for your money. Help them to realise that most things you do will involve paying for something at some stage.
Lesson 2 : Money runs out
A very important thing to learn is that money is not infinite. At some point it will run out. So decisions may need to be made about what to spend money on.
Start by helping them become familiar with different coins and how much they are worth. Then to reinforce this, give them a coin and help them decide how to spend it. It may be worth planning this at home rather than spending ages in a shop! You could prepare a list of things that they could buy for their money to help them decide which they prefer, then take them to a shop to spend it.
This can help to reinforce the point that you can only buy so much with the money you have, so will need to learn to prioritise.
Lesson 3 : Money needs to be earned
As well as understanding that money runs out if you just keep spending it, children also need to learn where money comes from.
With older children you could discuss various sources of income, including earnings, benefits, pensions, investments etc. But for younger children keep things simple by explaining that most money comes by being earned.
You may already give your child pocket money. The average starting age for pocket money in the UK tends to be around 4. The average amount of pocket money starts at around £3 per week for a 4 year old, rising gradually to around £7.50 per week for a 14 year old.
But either as part of the pocket money, or as an extra, it is also a great idea to give your child chores to do in return for money. They will then begin to learn that earning money can take time and effort, but that this will be rewarded.
Some typical examples include:
- Pet care
- Emptying the dishwasher or washing machine
- Vacuuming or sweeping floors
- Car washing
- Garden clearing
- Putting the bins out.
Lesson 4 : Keep track of your money
Whether your child has their money in cash, or in a bank account, it is important that they learn to keep track of it.
So for young children using cash, the money can be kept in a piggy bank or purse or cash box. Help them to count their money, particularly when they are being given more or are about to spend some. You may want to have a notebook where they can write down the money they have and what they are spending it on.
If your child is using a bank account, help them to check this online. There are also pocket money apps, some of which are linked to prepaid cards such as GoHenry or Osper. Prepaid cards enable older children to spend money when they are out and about, and track their spending with the app.
This could also be a convenient point to discuss spending with them. Left to their own devices, most children will fritter money away on sweets or bits and pieces that don’t last long. Whilst you do want your children to have fun, and enjoy their money, give them a bit of gentle guidance now and again to encourage them perhaps to spend a bit less on disposable things, and buy something better and longer lasting instead.
Many financial experts recommend that we split our money three ways. 50 / 30 / 20. 50% should be spent on needs, 30% on wants, and 20% on savings. That might be a helpful way to advise your child. Spend half their money on better quality, more important things and around a third on bits and pieces that they want.
Then try to put the rest away as savings. Let’s take a look.
Lesson 5 : Save money
It would be so valuable if your child can learn how to save money from early on in their lives. So encourage them to set aside part of their pocket money and earnings. Even if it’s not the full 20% we just mentioned, it’s important to get in the habit of putting something into savings.
Ideally keep their savings in a separate place or bank account from the rest of their money so it is easier for them to see their savings mounting up.
Discuss with them when it would be appropriate to dip into their savings. Perhaps help them to think of something that they really want and start saving towards that. This will help them to be motivated about the need to save money.
If you are able to do so, perhaps agree to make an extra contribution to their savings once they reach a certain milestone. That will help them to understand the concept of interest, and motivate them to focus on achieving their savings goal.
We hope that the above advice gives you some pointers about how to help your kids learn about money, and start to save money.
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