Educating kids about Money Matters
In today’s society, frivolous expenditure can leave children with the impression that ‘money is no object’. Learning the value of money at a young age will help with how children handle their finances in the years to come. More than 8 in 10 parents believe it is their responsibility to teach their children about money, yet one in six say they don’t feel confident about it. There are a few things that you can do as a parent to ensure that your child understands the value of money and how important it is to budget. Let’s make the up and coming generation money-savvy adults!
Why is it important to teach kids about money?
Teaching your kids about money management is one of the most beneficial life lessons that you can provide them with. As the saying goes ‘Money makes the world go around’ and your child will be dealing with money for the rest of their days so why wouldn’t you prepare them early on how to spend and manage their money effectively? From a young age, children are impressionable and tend to look up to their parents, therefore if we blow through the monthly budget within the first week after pay day, children may believe that this is an acceptable thing to do, thus setting a bad example. To fully accept and understand the value of money they must experience first hand it’s importance as research has shown that how we behave around money as adults is in fact learned early on from our parents. By helping your child understand and respect money from an early age you are ultimately setting them up for a brighter future.
Tips and tricks to teach kids about money
Introduce a piggy bank
Research conducted at University of Cambridge has shown that by seven we have already developed good or bad habits that will shape our financial behaviours for the rest of our lives, therefore, it is important that the concept of money is introduced in early years. The use of a clear piggy bank provides children with a visual of any money that they insert, this way they can see the money growing which acts as a motivator and encourages them to continue saving.
It can be argued that physical money will soon be a thing of the past as we move towards a cashless society given recent technological advances with the introduction of contactless payment etc. Pigzbe is a hand held piggy wallet that teaches children about money in the 21st century, it works with digital tokens as opposed to cash allowing children to play and learn, children can watch their savings grow in a fun game environment.
Some parents worry about exposing their kids to money too early as they want to protect them from the pressures of adult life. However, money can be introduced to your child in a fun way. You could begin by allowing your child to handle the money when you go to the shop, let them hand the cash over to the shop assistant and to help you count out the money first and check the change. Actively handling the money allows them to see that things come at a cost and the more exposure they have to it will allow them to develop a better understanding of how it’s used day to day. This conveys the message that there is a limit when it comes to money and when it’s gone it’s gone, introducing the concept of how important it is to budget.
Now that your child has a better understanding of the purpose of money, you can begin introducing pocket money. Pocket money is a good way of rewarding your child for good behaviours. You could introduce a simple chores rota, washing/drying the dishes, cleaning their room, helping with tidying up and once they have completed all their tasks, they are rewarded with their pocket money. This concept is akin to the real working world which your child will at one stage be part of, it helps children understand that money must be earned – not just given to them; adding weight and significance to the concept of receiving money so that it is not taken for granted. Providing children with pocket money gives them a sense of independence and instils good money habits.
Whether it be real or pretend now is the time to get your children into the habit of budgeting their money, no matter how big or small. Teaching your child how to budget will help them to apply this skill in later life which is an essential skill when it comes to managing a household and they have several different bills to pay out.
Most kids these days are quite familiar with smartphones, so why not let them create their own budget using an app? For the best budgeting apps of 2018, you can check our blog here.
Educating your kids about debt
The idea of debt is often a foreign concept to children, however, educating them on debt is important! Imagine that you are out at the shop and your child wishes to spend their pocket money on a toy however they have forgotten it at home; this would be the perfect time to introduce the idea of debt/borrowing money. You could offer to pay for the toy as long as they repay you the money when they get home.
Debt is often unavoidable; therefore a child can be introduced to the fact that there is a difference between good and bad debts. A good debt is one that is cheap and affordable to repay; they are often investments such as mortgages and student loans which are valuable. Bad debts are those such as payday loans and 0 percent overdrafts which can quickly spiral out of control when they are required to be repaid. You can make your child aware that it is important to save for big purposes whilst educating them on the fact that excessive expenditure and living beyond their means can lead to financial despair.
Having been exposed to money throughout their childhood children will learn of the benefits that good money handling has in the long term as opposed to only focusing on the short term. Don’t let money be a taboo subject within your household, instead lets raise a generation of money-savvy savers.