Parents are always giving advice to their children – which is often ignored! So how can you help make sure that your child or grandchild takes notice and learns about money, and is prepared for the adult world? Life lessons about money are important and you will be doing your child a favour by teaching them when they are young, rather than letting them find out the even harder way by failing as an adult.
Money is often an issue, so here are 4 great tips from our experts for you to pass on to your children.
1 Teach them to look ahead and budget.
This is a simple way to help your child learn to be responsible around money. What’s more this is appropriate from quite young ages – maybe start around ages 8 to 10 but it works just as well for a 16 year old! Obviously different children respond in different ways, but give this one a go when you think they are ready. Firstly, give your child their own bank account and each month bank their allowance. Secondly, help them set up a mini spreadsheet/chart/wall planner/sticker chart/app to plan what they are going to spend it on or save it up. Then, allow them to spend it or save it!
When talking to your child about how to spend or save, it is a good idea to group expenditure and break their money up into different segments or pots. For example: how much to have available each week of the month for buying sweets, or saving up for a toy, or saving up for presents for birthdays, Christmas, Mother’s Day , Father’s day, etc. One important point is not to bail your child out when they spend everything straightaway and have nothing saved up for the rest of the month…they need to learn life lessons!
As they get older you can change the nature of the different pots. It is useful to get them to think of saving up for a bike, or a holiday, or Uni or a flat. Getting them to think about saving and spending, and especially to think ahead and save and budget, is the objective.
Also, as your child gets older, you can give them more independence over spending money by getting them a prepaid debit card. This gives you a way of controlling how much they have and monitoring what they have spent it on… and a way of locking the account if they lose the card!
2 Teach them to work for their money
We all know that in life nothing worth having comes easily. We also know that giving your children all the money in the world won’t actually help them. Teach them to work for their money and they will appreciate it more – and also appreciate the things they spend their money on.
So this tip is all about valuing household chores and enabling them to earn through work. Maybe put a price list up on the fridge for hoovering each room, or hanging the laundry out to dry, or doing the washing up, etc! Get as creative as you can – but also you need a mixture of easy and hard tasks. With the harder tasks getting a better payout!
Some parents give no allowance and it all has to be earned. Others pay a minimal allowance with extras that can be earned. What you do is up to your judgement as the parent.
When they get older, say 14 to 16 years old, encourage them to go out and get a weekend or holiday job so that they really can earn their own money.
3 Teach them to be an entrepreneur
No doubt we have all heard the life stories of the giants of the business world. One similarity between lots of them is that they all found ways to earn money as a child entrepreneur. What can they do, or make and sell? Can they organise others to help them to earn money? There are normally two distinct stages in how this works: firstly finding something that the child can do for others that earns money, and secondly, ‘employing’ other children to help them.
Obviously the first step is sitting down and thinking about the possibilities of what the child can do and simply helping them to make a list of ideas to try. The second is encouraging them to think like a business, and grow what they do by using others to help earn money.
4 Teach them to have a good credit score
Actually, this point is both about having a great credit score and about how to be responsible with credit cards. In the modern world credit is a fact of life and our credit score is one of the ways in which we are judged. Credit cards are a fantastic financial tool – but one that is easy to abuse, and thus get into financial trouble.
As soon as your child is old enough – currently 18 years old – get them to apply for a credit card. Then get them to use it to spend on….But! – and this is an important but – firstly, they only spend on things they would pay for anyway, for routine rather than extravagant spending. Secondly, they ensure that they set up a direct debit to completely pay off the card balance each month. This should achieve two results. The first result is to get them in the habit of using and paying off their card bill in full, rather than building up a bill and paying it off in dribs and drabs and incurring lots of interest charges. The second result of using and then paying off their card each month is that they will develop a good credit score.
Note that prepaid cards do not affect your credit score, so this tip is only for young adults who can get credit cards.
Like our 4 tips? Or hate them? Or used them and got some feedback? Let us know!
