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How to teach kids the value of money

Posted on 20 September 2017

How to teach kids the value of money from pocket money to part-time jobs

It is important that children recognise the value of money and understand that it is not an unlimited resource which can be blown on one occasion. They can learn how to be responsible with money. Giving them the freedom to manage their own budget when they get old enough will teach them valuable lessons about only spending what they can afford and avoiding the pitfalls of unplanned expenses.

1.       Pocket money and budgeting

For many people, pocket money is the first taste of financial responsibility. This gives them the chance to either hold onto the money to save up for something special or to spend it whenever they like.  By providing your child with a regular, set amount it will give them a sense of reasonability.

Tasks are a great way of helping them to practice financial responsibility. This could mean setting a budget for your son or daughter for lunch that week. If they take this money and spend it on clothes, or going out, then they will learn a valuable lesson when they find themselves stuck having to bring in sandwiches from home.

Part of teaching your children how to manage their finances comes down to being strict with the money you give them and not bailing them out if they overspend. It’s better for them to learn with small amounts now than later in life ending up with debts.

2.       Learning from parents: Set the right example

When it comes to managing finances, many children get influences from their parents. So if you’re the type of person who saves up to buy something, then it’s more likely that your kids will do the same. If, on the other hand, you’re quick to turn to credit to fund non-essential purchases, your kids are likely to follow in your footsteps.

One way of setting the right example is by including your children in some of your financial decisions, especially as they become older children. This could include how you shopped around for a better deal on your current account. You can take this a step further and let them do some grocery shopping with a list and strict budget. Just be careful you don’t end up with a kitchen full of sweets and crisps!

It’s also a good idea to be open with your kids about some of the financial mistakes you made when you were younger. Sharing your tales of woe can be a good way to highlight the dangers of poor money management. Whether this means telling them about the time you couldn’t afford to fix the car after it broke down, or how not getting your home insured cost you thousands after a burglary, these are valuable lessons you can share.

3.       Developing a savings habit

Learning about the importance of saving and only buying things which you can afford is an important part of adult life. This may mean encouraging your children to put aside a small amount every week. Without it your kids may not be able to achieve their long term goals, such as buying a car, going to university or providing a home for their family.

It can be difficult to talk to children about the need to save. However, there are certain opportunities you can seize. If, for example, your child is interested in having a mobile phone contract, this is a great time to sit down with them and work out how to meet the cost. This might mean looking at how much needs to be put aside each month, or if they are a bit older, searching for a part time job.

4.       Help them manage their first wage

If your child is trying to save up for a large purchase, or simply wants some extra spending money, one option is to find a job.

Getting a job can be a teenager’s first step towards financial independence and can play a key role in preparing them for the future; a Saturday job is a great way for them to earn their own money. Whilst anyone over the minimum school leaving age can work full time.

If your kid does get a first job, this will often result in an increase in the amount of cash available to them. This is great opportunity to put some time aside and talk to them about the importance of saving. This can be as simple as deciding to put aside a certain sum each month for a rainy day, or, if they have a set goal, helping them make sure they reach it.

For example, if your teenager would like to buy a car, you could show them how to set-up a Direct Debit to their savings account each pay day. This will make saving automatic and make it easier for them to stick to their budget. You can also help them understand their payslip and talk them through everything they need to know to make sure they’re signed up to the right bank account.

For more information take a look at www.moneyadviceservice.org.uk