As your children grow up and start asking to borrow money for different aspects of their lives, it can burn a hole in your pocket! When your child is young you can help them understand the basic concept of saving, teaching them different ways to put some money away for a rainy day. We have created 5 practical tips on how you approach your children about money.
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5 Tips for Teaching your Child About Money Management
Create a timeline
The most practical way to initially teach your children about the concept of saving is by creating a timeline, helping them to understand how saving a small amount each week can allow them to reach a goal. For example, if they hoped to save £30 to buy a new toy, this could be done by saving £5 every week for 6 weeks.
An effective way to do this, is to start by getting a long piece of paper and a marker. Have £0 on one side and £30 (or the amount your child hopes to save) on the other side. Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal – making everything measurable and easy to understand, while getting them involved in the process.
Every time an amount is saved, draw a line illustrating how much was saved e.g. £10. Keep your kids motivated by giving small rewards (star stickers, choosing their favourite meal or movie etc) at each checkpoint. Visuals are also helpful in illustrating their savings goals and how their money is growing, keeping them interested, educated and motivated to reach their goal.
Use a traditional piggy bank
For young children, introducing a simple clear savings jar to store all their loose change and pocket money in, is a great idea. It’s best to go for a clear jar where they watch their funds grow - and one that cannot be opened without a tin opener or extreme force as they are less tempting to sneak a pound out of!
Give commissions, not allowances
Every parent enjoys treating their children once in a while. If you would like to teach your kids how to be smart with their money, you can try giving them commission on house chores such as tidying their room, putting their toys away after play time, or even doing the dishes. This way it will help them to understand how money can be earned.
Open a savings account for them
Opening a savings account is a great way to give your child a helping hand for the future and kick-start their saving. With your bank provider, you can set up a savings account on behalf of your child from a young age. These accounts can be opened with as little as £1 and money can be deposited as and when you prefer.
When your child gets older, these accounts are worry-free. Unlike an adult current account, this type of account has no overdraft facility so your child cannot borrow money and it also comes with a daily withdrawal limit to control their spending.
Start a conversation
Money management is one thing that children aren’t normally educated on in their younger years. When they reach their teens and suddenly need money for their social lives and other necessities it can come as a shock to them how money works. It’s good to start a conversation around a number of things like university fees and how loans work, the importance of a part time job, and of course how to enjoy their teens while being smart with their money.
This can be gradually built upon at a young age, starting by asking your kids what they think their wants and needs are, how they’d like to save, and what they’d like to spend their savings on, and building on this as they get older.
How do you teach your kids about money?
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