Charlie Weston and Sinead Ryan’s new weekly guide to managing your money
Your children are never too young to start learning how to handle their money
As the new school year starts, many parents are already in debt. It’s an expensive time of the year and we’ll be struggling until mid-term to catch up.
Many of us try to shield our children from money worries, costs and concerns. We think we’re helping but, in fact, we could be setting them up for a fickle financial future of their own.
And with most transactions now online, kids are no longer learning how money works.
Recent research from Australia terms them the ‘invisible money generation’. Without being able to watch how cash is earned, saved and spent directly, they’re growing up in a world where the technology is all they will understand, rather than the value of money itself, it says. “Tap and go” experiences don’t equip them well enough for their financial future, says the ‘Share the Dream’ report which found 66pc of parents believe digital transactions mean we understand less about ‘real’ money. Older children who had a parttime job were shown to be more money savvy. MoneyWhizz.org founder Frank Conway says there are six pillars of financial knowledge: earning and income, saving and spending, credit/ debt, protection, investing and financial budgeting. So, how early is too early to learn and what lessons can be taught?
Age 0-5: Children at this age can understand coins. A colourful money box is the simplest way to encourage saving. Getting them to add up and count out money is a great way of introducing the topic. They should be able to work out 50c is the same as five 10c coins. Once they’ve established recognition, use games to collect 20c from a selection of smaller value coins. Tip: Get a ‘paint your own money box’ (€8.99, Eason.ie). Age 5-12: At this stage, you can start paying pocket money, says Mr Conway. “It’s a really important way for them to understand the value of money and budgeting. But you must have ground-rules – just like your salary, they don’t get ‘bailed out’ if they spend it all on the first day. Having them ‘spend half, save half ’ is a good concept”. Giving pocket money by age is also a clear incentive (eg €7 for a seven-year-old).
All banks have children’s savings accounts (some must be in parents’ names), with added incentives like back-packs, activity sets and so on. Bank of Ireland’s Young Saver Account pays 2.5pc on children’s savings accounts.
Understanding concepts like ‘cash-back’ is important, along with interest rates on deposits and loans. A good conversation starter is why banks give you so little for your money, but charge so much for theirs!
Tip: Open a post office account using ‘Cyril the Squirrel’ savings stamps. Get into the habit of buying them once a week.
Age 12–18: Teenagers are well able to manage a simple bank account, says Mr Conway. “Student banking is free, and they get used to using an ATM card.” AIB’s Second Level account, Bank of Ireland’s Student account, Ulster Bank’s UrMoney and PTSB’s Teen Account all offer ATM cards and fee-free banking (you will pay the Government stamp duty of 12c per transaction on all except AIB’s). Download the bank’s app so they can keep control of funds. Setting up a deposit account means any money earned through gifts/ work can be saved separately.
Tip: Teach concepts such as compound interest, deposits, overdraft. Pay a monthly allowance instead of pocket money, encouraging budgeting over a longer period. “You could incentivise them to set goals and stick to them, say 10pc or 20pc match if they reach their goal”, adds Mr Conway.
18+: All banks offer fee-free banking to students, usually up to the age of 23. This may be the first time they are offered credit by way of a student loan. Bank of Ireland has a €1,000 student loan at 1pc interest for college expenses. Larger loans may involve parental guarantees.
Tip: Setting up an account with Revolut or similar e-banking firm is a great way of money-sharing among friends and flatmates and accessing cheaper foreign currency.