How are you getting on with balancing homeschooling and work? Schools have closed for the foreseeable future, all exams cancelled, and parents across the UK find themselves at home having to support their children’s learning and education.
On a positive note, this gives parents the opportunity to teach their children everyday life skills – things that are not typically taught at school. And as a parent, you have an opportunity to teach your child important lessons about money..
One of the first lessons we can teach our children is to wait to buy something they want. This can be a difficult concept for people of all ages, but teaching our children at a young age is especially valuable. One approach is to set savings goals for them to buy a new toy or game. Children could earn more pocket money from extra chores around the house or achieving milestones in their learning.
It’s important to encourage children to budget and work toward an individual goal. All children like being set a fun challenge, but it has to be realistic. Set an age-appropriate amount, which they can use to buy something online that they really want. And once they reach it, not only do they see how rewarding saving can be, but it teaches them that they are in control of their money.
This sets them on the path to financial independence for the longer term plus when saying they want a certain toy or thing they have seen on an advert you can say “why don’t you start saving for it” rather than field constant questions about buying for them.
For children at primary-school age, there are practical ways of teaching basic math skills. Playing ‘shopkeeper’ and asking them to work out how many different combinations of coins make up the amount – so £3.50 could be three £1 coins and a 50p coin. Draw up a snack list with prices (high sugar items cost more, low sugar, less) with each child being allowed to spend up to £5 per day.
Similarly, when you go shopping, give your child some money, for example, £2 to choose which fruit to buy to give them the experience of making choices with money.
With older children it can be more focused to their future independence. Me and my 12 year old have begun discussing budgets on a bigger scale. When the Chancellor announced the £10,000 grant for businesses on Small Business Rate Relief we were driving to Swimming Club (back in the days when such things existed) and had a good discussion about how far that would go if she were at Uni. £x on rent and £x on food leaves how much left for clothes, socialising and books? After talking it through £10,000 went from an incredibly large amount of money to not barely enough get by on.
Engaging children in money is increasingly important as we move into a digital, cashless world. A few of the best finance apps are designed specifically for kids and their needs. Free and low-cost apps offer great help when you’re teaching your kids about money.
Children are used to using apps from a very early age, so it makes sense to utilise these tools to bring money to life and make finance fun. Getting them used to seeing the money leave their app when buying things is a good way for children to begin to asses the value they put on buying certain things. It soon helps them asses if they value you it enough to spend their own money on the latest fad toy rather than your money.
Lots of banks and money apps now give users the option of sweeping money into a separate savings pot. This feature can work well for children with debit cards too. Sweep 33p on a packet of biscuits and whilst it might not seem like much, it won’t take long to accumulate in the long run. What’s more, children can see what it looks like for money to grow over time, instilling good habits early on and paving the way for bolder decisions like investing.
Many lessons about money are also principles for life. It might seem strange to talk to a child about pensions, but children can learn a lot about saving from older generations. They can speak to their grandparents about lessons in money they wish they knew earlier in life.
Could they have saved more had they started earlier? Would they have a bigger pension pot if they had known about pensions from childhood? It’s never too early to start saving for the future, and the earlier in life people know about it, the sooner they can start to prepare. Warren Buffet started buying shares at age 11!
If you have a Junior ISA for your child, talk to them about it so that they can see a longer-term view of how money works, as well as getting them more familiar with the ups and downs of investing and keeping focus on the long term. Don’t underestimate children’s ability to understand and engage with finances or the life lessons that can be taught through this.
If you don’t feel confident in the lessons their grandparents or are looking for something alternative to make them watch on youtube at the moment then I can recommend Ray Dalio’s Principles for Success book and YouTube videos which my girls have really enjoyed.
Stereotypes about young people wasting their money often get in the way of teaching them positive messages. While children can’t yet start investing, they can change behaviour toward budgeting and saving.
Teaching your children about money at any stage is going to take time on your part. It won’t always be easy.
But if you want your children to know how to successfully manage their money when they get older, taking the time now will be worth it.
Jon Doyle is Founder and Financial Planner at Juniper Wealth Management. Advising clients since 2008 he has guided clients through good time, bad times and the ugly. With a clear vision on how advice should be delivered and strong opinions on how we should be investing money in order to live the life we want to live free from money worry.