We all look back on our carefree childhood days with a degree of wistfulness, and there isn’t one of us who wouldn’t sometimes like to go back to being seven years old. No bills to pay, no essentials to buy, no worrying about pensions, investments, insurance and the like.
As we look at our own children, it is natural that we want them to enjoy childhood too and to protect them from life’s harsher realities. That’s fine as far as it goes, but if our children grow up without a basic grounding in how to manage money, we are setting them up for potential disaster in later life.
Educating children about money management doesn’t have to mean robbing them of their childhood innocence, as the following examples demonstrate.
Lead by example
Children learn as much by imitation as by what you actually tell them. We’ve all been guilty of “do as I say, not as I do” from time to time, but try to set a good example in the way you manage your own money. If money management is not something you are great at, don’t be afraid to admit it. After all, there is nothing wrong with learning together!
Teach the benefit of saving
Set up some kind of mechanism for saving money, whether it is a coin jar, a piggy bank or a junior savings account. You probably have an ISA to make the most of your tax free allowance, but did you know your child can have one too? Take a look at this website for further information about the different sorts of ISAs that are available, for both adults and children.
There’s no better way to learn than through practical experience. Give your children a little pocket money each week, and allow them to choose how to spend it. Encourage them to plan their purchases, for example by saving up over the course of a few weeks for something they really want. Give them a small “pay rise” each birthday to keep in step with their likely spending needs.
Provide bonus opportunities
Helping around the house is part of family life, and it is a step in the wrong direction to pay your child to do the washing up or tidy up. However, there is nothing wrong with providing additional earning opportunities for special extra tasks, for example sorting out the junk in the shed or something along those lines. Help them decide what they are going to do with this extra money.
Show them how to shop smart
So your son wants to blow six weeks pocket money on the latest toy that everyone is talking about. If that’s what he really wants, then so be it, it’s his money. But make sure he’s thought about other options too, and before rushing to the high street toy shop, take a look at other possible sources, such as Amazon or the supermarket, to see if they sell it at a better price. This is also a great opportunity to talk about the psychology of advertising and to teach him to be a savvy consumer and also how to do proper research especially for good financial reviews.
This is a contributed post.
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