The Importance Of teaching Children Financial Tips

The importance of teaching children financial tips

The importance of teaching children financial tips

Thanks to pocket money, birthday or Christmas gifts (or even part-time employment for those old enough) many children in the UK have some kind of access to their own money. Even if it’s just a few pounds per month, having your own cash can bring a kind of freedom that signals growing up to parents and kids alike.

But should you be talking to your children about how to best manage their funds? Things like investing and saving can feel like ‘grown-up’ topics, but is there an argument for sharing this knowledge sooner rather than later? We think so. In this post, we discuss the importance of financial literacy for children.

Set good financial habits

If children see their parents sticking to a budget and avoiding unnecessary debt, this can stand them in good stead for the future. Money can be a taboo subject in many households, but by opening up the conversation and being transparent where you can, you give your kids the opportunity to learn.

One way to do this is to let them help with the food shop or plan some days out. Whilst you can have the final say on what gets spent, you’re giving them the chance to practise their newfound skills in a safe environment.

Teach them patience

As a parent, you want to give your child the world, but holding back on non-essential spending might actually give them a greater appreciation for occasional treats when they arrive. As adults, most of us have to wait and save for what we want, and learning this patience in childhood can make things that bit easier.

If your children have their own money, talk to them about the value of saving up for something bigger, rather than spending their cash the moment they get it. They’ll probably work this out themselves, but starting the conversation can help avoid any frustration or impulse spending.

If you want to take things a step further, you can use their pocket money as a way to get them used to the concept of loans. Consider lending them a few extra pounds for something they really want, and getting them to pay it back each week or month – interest is optional.

Moving towards financial independence

Money can be a scary topic, and for most young adults, their first experience of managing it independently is at university or their first job. This can feel a little overwhelming, and they may be easily influenced by others or rely on them to make financial decisions. Promoting a healthy attitude towards money and increasing their knowledge before they leave home can mean they are less vulnerable to scams and other financial concerns.

Practial Tips And Ideas

As a mum with a 3-year-old girl and a 10-year-old boy, I’ve learned a thing or two about helping children save money at different ages.

For Toddler & Preschooler:

1. Start Simple: At this age, keep it basic. Introduce the concept of money through play and everyday activities. Use real coins during playtime to teach them about different coin values and how they add up.
   
2. Piggy Bank Fun: Get a cute piggy bank and make a game out of putting coins inside. Encourage her to save a little from her piggy bank whenever she receives money as a gift or reward.
   
3. Visual Savings Goals: Use pictures or drawings to illustrate what they are saving for. Whether it’s a new toy or a special treat, having a visual reminder will make saving more tangible for them.
   
4. Patience Pays Off: Teach that good things come to those who wait. If they want a new toy, explain that they need to save money for it instead of getting it right away. It’s a valuable lesson in patience and delayed gratification.
   
5. Lead by Example: Show them how you save money for things you want as a family. Let them see you making choices about spending and saving so she can learn from your example.

For Primary School Children:

1. Money Management Basics: Now they are a bit older, it’s time to introduce the idea of budgeting. Give them a small allowance and help them decide how to allocate it between spending, saving, and maybe even giving to others.
   
2. Bank Account Adventure: Take them on a trip to the bank to open there own savings account. Make it a special outing and involve them in the process. Seeing their own account balance grow will motivate them to keep saving. Gone are the days now of saving for the different pig money banks but seeing the balance grow can be reward enough.
   
3. Set Savings Goals: Help them set achievable savings goals. Whether it’s saving up for a new game console or a bike, break down the cost and discuss how much they need to save each week to reach their target is key in teaching children financial tips. Coinit is a great tool to help them save and will gain thier engagment.
   
4. Encourage Earning Opportunities: Encourage them to explore ways to earn money beyond just their pocket money. Whether it’s doing extra chores around the house or helping out with family and friends chores, earning their money will teach him the value of hard work.
   
5. Teach About Interest: Introduce the concept of interest and how it can make savings grow over time. Show bank statements and explain how the money can work by earning interest.

For Teenagers (13-18 Years Old):

1. Encourage Part-Time Work: As teenagers become more independent, encourage them to get a part-time job or take on occasional temporary work. Earning their own money will instill a sense of responsibility and independence.
   
2. Emphasise Budgeting: Sit down with your teenager and help them create a budget that outlines their income and expenses. Teach them to prioritise necessities like savings, transport and personal expenses.
   
3. Introduce Banking Tools: Help your teenager open a checking and savings account if they don’t already have one. Teach them how to use online banking tools to track their spending and savings.
   
4. Set Savings Goals: Encourage your teenager to set both short-term and long-term savings goals. Whether it’s saving for a car, university, or a trip, breaking down goals into smaller milestones can make them more achievable.
   
5. Teach about Investing: Introduce the concept of investing and the potential for long-term growth. Discuss different investment options, such as ISA’s, stocks, bonds, and mutual funds, and encourage them to start investing early to take advantage of compound interest.
   
6. Lead by Example: Be transparent about your own financial decisions and involve your teenager in family discussions about money. Show them how you budget, save, and invest, and encourage them to ask questions and seek advice.
   
7. Discuss Debt and Credit: Teach your teenager about the dangers of debt and the importance of teaching children financial tips in using credit responsibly. Discuss the basics of credit scores, interest rates, and the impact of late payments on their financial future.
   
8. Encourage Philanthropy: Teach your teenager the importance of giving back by involving them in charitable activities or encouraging them to donate a portion of their earnings to a cause they care about.

By tailoring your approach to each child’s age and understanding level, you can lay a solid foundation for good money habits that will serve them well into adulthood.