Teaching kids good money management from an early age can shape their future attitude towards spending and saving. Rarely taught in much detail at school, money management is an important lesson to learn. And it need not be all doom and gloom. Giving your child good money management tips and experiences can be a fun and enjoyable process. Find out how with our top advice.
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Lend the kids money, then charge them interest on top, sell them treats from your kitchen cupboard tuck shop, or ask them to calculate the percentage saved on a supermarket baked beans offer... money mad parent? No, just some really great ways to teach the kids money management skills, writes Sam Barrett
Money management for kids
Children learn many things from their parents, including how to manage money. But, even if your own finances are in disarray, it's never too early to start teaching tips on money management which can only lead to good money habits in the future. ‘As soon as your kids start asking for things you can teach them about money and how to respect it,' says Anna Bowes, investments manager at independent financial advisers AWD Chase de Vere.
One of the key concepts that Bowes believes even small children can learn is to save. ‘Don't just give them everything they want,' she says. ‘Explain where money comes from and suggest they save their pocket money towards the item instead.' Piggy banks can be good for smaller items, allowing them to keep tabs on how much money they've put aside. Other good tools include wall charts, which can be coloured in as they get closer to their savings target.
You can also reward them for saving, as this will send out very positive messages as well as demonstrate how interest works. For example, if a child is saving £5 a week for a £50 toy, you could add £5 to their total every time they save £10.
Kids' savings accounts
But, rather than paying interest on your child's savings yourself, a savings account is worth considering. ‘Running a savings account can build lifelong savings habits,' says Jason Clarke, a spokesman for the Halifax. When he was a child his grandparents gave him pocket money every week, half of which was to spend the other half to save. ‘We used to go to the building society every week to pay it in and we could see it grow in our passbooks,' he adds.
Clarke also recommends getting your child involved in picking the best account. Websites such as moneyfacts.co.uk and moneysupermarket.com have details of all the children's accounts to help them compare, and understand features such as interest and notice periods.
You can also incorporate more advanced concepts such as earning money and credit into your child's financial education. Gillian Ford, communications manager at The Children's Mutual, explains: ‘There's nothing wrong with offering a child ways to earn some money by doing jobs around the house. Helping with the cleaning, gardening and washing the car are all possible tasks.'
She also believes that offering a child credit can instil valuable lessons. ‘Don't lend too much money or come over all heavy with interest payments and such like, but if they do want something consider letting them borrow money that they have to pay back.'
Tips on money management through games!
The best way to teach your child about money is to make it fun. Here are some ideas about how you can do this.
- Sorting coins - Young children aren't always good at telling the difference between coins according to the Personal Finance Education Group. It suggests giving them coins to play with to help this, asking them to carry out tasks such as putting all the same coins together, finding a particular coin and working out how many different coins there are altogether.
- Play shopping - Making a shop - perhaps from items in your grocery cupboard or by making items for sale - is a fun activity that can help children learn a variety of financial lessons. For younger children, it'll teach them about the simple concept of exchanging money for goods, while older children will get some good practise with basic mathematics such as subtraction and multiplication.
- Supermarket sweep - Taking your kids to the supermarket can be a nightmare but it's a great place to teach them about money. Distract them from the sweet aisle by asking them questions about prices and the relative value of different items. It's also good to use special promotions such as ‘buy one get one free' or ‘50 per cent free' type offers to teach older kids about more complex financial concepts such as percentages.
- Tuck shop - Rather than give your child treats such as sweets and crisps, set up a tuck shop. ‘My mum used to make me buy chocolate out of a tuck drawer when I was a kid,' says Anna Bowes, investments manager at independent financial advisers AWD Chase de Vere. ‘This got me used to dealing with money from an early age and made me value it more.'
