It is never too early to start teaching children about money; how to spend it, how to save it and how to invest it. Providing children with information on their choices, the outcomes of their actions and the results that occur from them will enable them to make wiser, more informed choices as adults in later life.
We have come up with six ways that can help you teach kids to be more money-savvy:
Give them the opportunity to handle money
Actually handing money is becoming a rarity nowadays, thanks to an increasing amount of transactions occuring online or with cards. Working in pounds and pennies and handling them is a visual, tactile way of engaging all the senses, and instilling the realisation that money is not just a number on a screen, it is something that is actually real.
Explain the good and the bad in a way they will understand
When discussing money with youngers it is easy to focus on one or the other; the good or the bad. The truth is that when it comes to money there is a balance to be had. Money is neither good nor bad, but it is what you do with it that makes life what it is. Many people nowdays are struggling with poor credit ratings that are impacting their lives in general. In order to explain this concept better, Just Mortgage Brokers have created this tool that calculates the cost of a poor credit rating. Seeing how a slight change in the numbers can have a huge impact overall can help children to understand the importance of their credit rating.
Use Savings Jars
It is not exactly high tech, we know, but it is an effective method of encouraging children to balance their money in different ways. A three jar set up can provide your child with the option to spend, save, give or, if you prefer, to spend, save, invest. With the latter, your child can choose between short-term savings for that toy or game they have their eye on, for example, and long-term savings.
Discuss Wants versus Needs
In a time when social media can make it feel like it is all about the ‘stuff’, make sure children are aware of the differences between something they want and something they need. Get them to think about their priorities and what they deem to be more or less important, and how much they are willing to pay to get it. Give them a breakdown of how many work hours that purchase would cost them. This, in turn, will help to get them in the habit of thinking critically about whether they do actually want something or whether they decide that, actually, it just is not worth it after all.
Set a savings goal with an incentive
If your child has their heart set on that new outfit or the latest gadget, make the value of it their savings goal. Encourage them to keep track of how close they are to reaching that goal, perhaps through a record book of their savings that tracks their balance as it increases. If you want to give them even more of an incentive to stick to reaching their goal, you could always offer to add a bonus payment by matching their savings or by adding a 10% bonus to the pot.
Let them know that no conversation is off limits
Reassure your child that sometimes, things happen. We all make mistakes and they might find themselves in a little financial trouble that they are not sure how to deal with. Let them know that, no matter what, there is nothing that they cannot discuss with you. Talking openly about money, both the good side and the bad, is imperative straight from the off. Do not let them believe that it is an uncomfortable or taboo subject to broach.