When I was a child, the world was a different place. There were four channels on the TV, no mobile phones or nail bars – and I don’t recall being as fashion conscious as my daughter at her age. Your friends would knock at your door, bicycles poised, ready to take you on the day’s adventure.
Life was so much simpler in many ways. Your parents, although very hard-working, were ever present and children were without the distraction of modern technology and social-media judgement.
Today, our families are still the same, but the world is much more complex, particularly when it comes to organising finances. However, life events are much the same as they once were – going to school; buying our first car; getting married; buying a first home. However, managing these events financially is a skill that is rarely taught in a formal setting.
This is one area where we all need to take time out of our busy schedules to teach them the important life skill of managing their money wisely. It’s up to us to show them the way. But where do we start?
How to teach them the value of money
My suggestion would be to involve them in family money discussions, maybe even put them in charge of the household budget for a week, or even a month, under your supervision of course!
Talk them through your income and expenditure, such as the mortgage or rent, utility bills, food and clothes, as well as extras such as holidays, dental and hair appointments, school trips and sports clubs.
Then at the end of the month, discuss their experiences with them. How much money was left? What did they learn? Could they have spent less - and how?
Make them work for their pocket money
Let your children see how many hours it takes to earn a certain amount of money, encourage them to do household chores in exchange for their weekly spending money. Show them where they fit into family life and how they can help, many families seem to have lost this. This is a vital way of teaching your children responsibility and accountability.
Encourage older teenagers to look for weekend work – earning their own money and seeing just how far it goes is a great life lesson.
Warn about debt dangers
Speak to them about the dangers of credit cards and the consequences of buying things that you cannot afford and becoming reliant on credit and the exorbitant interest rates charged – and what could happen if they couldn’t keep up repayments.
Teach them about credit scores
When your children turn 18, teach them about the importance of maintaining a good credit score. If they have a poor credit score, lenders might charge higher rates of interest, offer a smaller credit limit – or reject a credit or mortgage application altogether. Teach your children how to ‘boost’ their score by adopting good financial practices.
When they first step out in life, they will not have any credit history for institutions to rely on, they will need to start to build a score for themselves. Opening a bank account and maintaining it well is a good first step on this journey.
Encourage them to save
Get them interested in putting a regular amount of money aside, there are many very good price-comparison websites offering statistics on the best savings rates for children’s accounts. Junior ISAs also offer a great first step into the financial world, with cash and stocks and shares varieties available. Whilst cash seems safer, investing in the markets could give them a higher return, but educate them on the dangers of market risk.
Sometimes a good old-fashioned money box can help children feel the importance of saving and make them responsible and ultimately more grown-up. After all, there is nothing like seeing a pile of money increase.
Invest time in your kids
Show them the importance of saving in the short, medium and long term, teach them about the merits of pensions and investments, show them how to plan their futures. Help them set life goals and discuss the potential amounts of money needed to achieve each stage and how long and how much they will need to save for to reach each milestone.
Historically, women earn less, save less and invest less. Show your girls how to be financially independent, talk to them about the opportunities that money can provide, rather than what it buys. If they start to save early, they can build a pot of money that they can use long term – if they want to take a career break and start a family, for example.
Things to be wary of
Children are likely to be much more tech-savvy than you, but also more casual about sharing their personal information online. Warn them about the dangers of doing this and let them know that a bank or financial institution would never ask them to divulge their personal information.
The final outcome
Having financially astute kids will ultimately save you money, whether it be that they learn to put a jumper on, rather than turning the heating up, putting a lid on the saucepan to reduce the amount of energy it needs to bring it to boiling point – or being cash-aware when they go shopping so they only buy what they need.
If you have children at university, suggest that they set up ‘a whip’ when in the pub rather than buying rounds, recommend that they pool money for food and drink. Going to a supermarket and buying rice and other foods in bulk and sharing the costs and merchandise with their fellow roommates is a great way of saving money.
All these basic life skills will help build confidence in your children and will set them on the road to financial independence, leaving behind very proud parents.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.