Sarah Pennells of www.savvywoman.co.uk offers some useful advice on essential household finance.
Where did you learn about money? At school? From your friends? Or are you the kind of person who went straight to the personal finance pages of the newspapers from an early age? Thought not! Most of us get our money habits from our parents – either directly if they taught us how to use money wisely – or indirectly if we saw how they managed their money and decided not to repeat their mistakes! So if you have your own children, it’s worth spending some time teaching them good money habits.
How to get started
Some primary school age children get money lessons, but the decision is often down to the head teacher. Even if your kids are taught about money, there’s no harm in reinforcing what they’re learning. Try these:
1. Help your children recognise different notes and coins and which coins are worth more than others. You can do this in the supermarket or at home after you’ve done your shopping.
SUPERSAVVYME TIP: You might find it easier when you’re at home rather than when you’re negotiating a packed supermarket!
2. Talk to your children about cost when you’re shopping. Ask them how much they think everyday items cost, anything from box of cereal to clothes (and be prepared for some comedy answers!).
3. Talk about the difference between needs and wants. This is a useful lesson for all kids to learn. Tell your children that you they can’t have everything they want and neither can you – and that sometimes you have to make choices about what you want now and what you’ll wait for or go without. Use examples (car, holiday etc) where you’ve had to make choices.
4. Once your child is old enough to understand a little about money (normally when they’re six or seven) start giving them pocket money. Work out how much you’ll give and give the same amount every week, preferably on the same day so it becomes part of their routine. Don’t worry if it’s all gone a few days later – as long as you don’t step in with a top up, your kids will soon learn. You could also give them two money boxes (one for spending and one for saving) and talk to them about the benefits of not spending all their pocket money before the week is out.
5. Use financial rewards to encourage good behaviour. This can be a tricky one and you don’t want to get into the situation of giving your children money (or stars towards a treat) every few minutes. Having said that, most children can see the point of doing something to get a reward. It may also help them appreciate how small rewards/amounts of money can grow.
If your children are older:
1. Get them involved in their child trust fund. Let your child see how their money is growing. Talk to them about what they’d like to use the money for when they’re older. Encourage them to save money they receive from aunts, uncles and grandparents either into their child trust fund or their own savings account.
2. Give them a fixed allowance. When your children start buying their own clothes, music downloads, makeup etc, it’s better to give them a fixed amount every week than to take them out shopping and buy them what they want. It will help them to learn how to prioritise what they spend.
3. Mobile phones. Encourage them to compare different pay as you go deals so they find something that suits how they use their mobile. Work out how much you’ll pay towards their bill (if anything) and what they’re responsible for.
Don’t expect your children to make good money decisions every time as it’s something many of us still struggle with as adults! But what your children should learn is that dealing with money isn’t mysterious and that decisions they make today are likely to affect how much money they have in the future.
About Sarah Pennells
Sarah is an experienced broadcast, print and online journalist writing about finance. She has her own website, SavvyWoman, which offers useful advice on all kinds of financial matters that affect everyday life – from children’s savings to tax to useful tips on divorce and money.