Teaching kids about money is an important part of their growing up. Lets give them a good start to a tricky road ahead.
Where’s my money gone?
What happened to to all of your money? Well, most of it would have just touched your fingers and depleated very quickly. Why? Well, schools are great at teaching us so many different subjects including maths and economics, but the one thing they don’t teach is real life experiences, such as personal finance. And how to make money work for you rather than you working for money.
When I was of school age, if I had money, I spent it on stuff I didn’t need, it was just money, I didn’t understand the value of it.
I worked hard over the years and, without blowing my own trumpet, I did quite well earnings-wise. I also did extremely well at spending it too. My aim was to work hard, to earn the money so that I could buy the stuff I wanted, but never needed.
It’s only in recent years Mrs F and I have really ‘matured’ and started counting the pennies and having a solid financial plan in place for the future. It’s still a work in progress, as money management should be, but we’re definitely on the right track.
It is a sad fact that many people retire only to live in poverty. They’ll work for forty odd years, and in that time earn hundreds of thousands of pounds to have very little to show for it.
Teaching kids about money
Where can our kids learn about personal finance? Well, ultimately it’s up to us as parents to teach them. The trouble is, that many adults are not too good at looking after money either. If I’m honest I’m not the best, again because we weren’t shown how to in our youth.
Let’s face it, in most households money matters are not discussed between parents and children. I am not suggesting that we start showing our kids our mortgage and bank statements, but certainly an honest discussion on maybe, why they cant have pocket money this month. Or why they may not be able to get the latest phone. Life happens, bills happen, it’s life.
What we can do though is advise our kids of the pitfalls and dangers that they will face later in life. Draw from your own life experiences and dealings with banks and other financial institutions. The good, the bad, and the, in some cases, very ugly situations. It’s important to allow them to understand that at certain times in our lives things are going to happen that will affect our personal finances. Some of these things that happen are out of our control and not of our own making. But there will be times where a choice has been made that “seemed like a good idea at the time”. We’ve all been there, done that, only to pay a BIG price at the end. I’ve definitely been there! Have you?
When and How
It’s best to start teaching your kids as young as possible. By the time a child is about 3 years old, they should really know about pennies and pounds. So they can understand the concept of handing them over in order to purchase goods. Hand over enough pennies and they get the sweets they want at the shop.
Tips to help kids manage money
Here are a few tips and ideas to help your kids start on the right path to financial prosperity. The Money Advice Service has some further information and great advice on teaching kids about money.
- Buy a piggy bank for your younger kids. Allow them to choose whatever colour shape or size they want. Then give them the opportunity to put their pennies into their piggy bank. now and again allow them to count their pennies and reward themselves if they want.
- Once they have proved themselves capable of handling their pennies, take them to open their own bank accounts. You may need to do this online, but most big high street banks and building societies have special savings accounts for kids. Depending on their age group, they may be offered some sort of incentives like fun packs, money-off vouchers etc. (can you remember the little yellow house money box you got from Halifax!?)
- A lot of kids think, “money grows on trees”. Let them know and understand that YOU working brings about this plastic and metal stuff called money. Whether or not you work or you have inherited a large fortune, don’t encourage laziness in your child. Give them little chores to do around the house, wash the dishes, cleaning the rooms, etc. Give your kids an allowance but let them work for it. It sounds harsh, but they also need to be able to work for free sometimes to learn the value of hard work. Mummy and Daddy won’t always be there to bail them out.
- Many relatives these days tend to give money for birthdays, Easter, and Christmas especially for the over 10s. I can see why… They’re a nightmare to buy for! their tastes are constantly changing. What a 12 year old and a 60-year-old see, as being “the in thing” is more often than not, very different!
Encourage them to save a percentage of their monetary gifts. If they are older and have a paper round or something similar, again encourage them to save 10% of their earnings. It might be only a small amount but it is a good habit to get into. Think about it. If you’re reading this now, as a middle-aged parent, imagine how much you would have in the bank today if you had saved 10% of everything you had ever earned. I bet it’s quite a lot!
Understanding the value of money
- “Money is the root of all evil” is a phrase you will often hear people say. Money actually brings enormous good into the world. Creating wealth helps create jobs for others. Investing in business helps to bring solutions into people’s lives by way of innovation and services. Money is neither good nor bad – it is what you do with it that makes the difference.
- Debt is one of the greatest social diseases (COVD19 excluded) of our time. The price to pay for the “buy now, pay later” philosophy is that you certainly will pay later. Unfortunately, some high street banks have contributed to this very philosophy. Debt imprisons you to a job you don’t like and it creates stress and anxiety in your life. Teach your kids the value of delayed gratification. “If you can’t afford it, don’t buy it”.
- Your financial health is really the difference between how much you earn and how much you spend. It makes sense not to pay any more money for something than you have to. Teach your children that bargain hunting doesn’t make you “Pov”, as my daughter would say. It just makes you a sensible individual. If you see the same item in two different shops with a reasonable price tag difference, which one are you going to buy!?
- Everyone is offered a method of making a fortune at some point in their life. Whether it’s a quick gamble or a once-in-a-lifetime opportunity, that can’t be missed. Teach your kids that creating financial wealth is a process based on common sense.
Like most parental advice, your kids will probably not appreciate it now. Later in life, though they will be grateful for the advice you gave. It’s important to start teaching kids about money so they have a solid understanding when they flee our nest.
Here’s a question for you – If you had learned the above principles when you were 10 years old, and had put them into practice every day of your life, would you be financially healthier today?