Turn your kids into smart spenders...
HARVEY JONES EXPLAINS WHY PARENTS SHOULD GIVE HOME SCHOOLING ONE LAST SHOT BY TEACHING CHILDREN HOW TO MANAGE THEIR FINANCES
THE pandemic has shown all of us the importance of saving for a rainy day and we need the next generation to learn it too.
Almost nine out of 10 young people aged between 16 and 24 say school did not teach them financial lessons. And many face debt problems as a result, according to research from money-saving app Student Beans.
More than one in three have credit cards and overdrafts, owing almost £2,000 on average, but don’t know what interest they are being charged.
It is never too young to start learning about money, so here are some lessons worth passing on.
LEAD BY EXAMPLE
Cathy Crewdson, partnerships manager at netvouchercodes.co.uk, says balance your household budget and live within your means as children will learn from how you handle money.
“If you have a flippant attitude to managing your finances, chances are they will too.
“When the shops reopen, take them with you. Show them how much – or how little – you get for your money.”
TEACH THEM THE VALUE OF MONEY
When you are out shopping with your family, resist pester power.
This will save you money and pass on a valuable lesson, says Abigail Yearley at topcashback.co.uk.
“Teach children the difference between wants and needs.”
Nicholas Agwuncha, co-founder of Money Medics, suggests teaching an economic concept that is called “opportunity cost”.
“Tell them if you buy this toy, you will not be able to afford that video game. That way they will understand they can’t have both.”
GET THEM SAVING
Banks and building societies offer children’s savings accounts and
most of them will pay higher interest than adult accounts.
HSBC pays 2.5% on balances between £10 and £3,000 for children aged seven to 17, while TSB pays 2.5% on up to £2,500, from age 11 to 18.
Pete Mugleston, money expert at Online Money Advisor, says the responsibility of running an account is a great life lesson.
“Monitoring their balance will make them feel grown-up,” he says.
Old-fashioned methods such as a money jar can pay off too.
LET THEM EARN THEIR KEEP
Children may value their pocket money more if they have worked for it, Pete says.
“Start off simple, by rewarding them for doing household chores, and you can encourage teenagers to get a weekend job.”
START SMALL, THINK BIG
Martin Goycoolea, head of growth at maths learning platform Eedi, taught his nephews to do a simple budget in Excel to track where their pocket money went over a year.
“They learned they could swap a short-term gain such as sweets for long-term satisfaction, say, saving up for a new guitar,” he says.
WARN ABOUT DEBT DANGERS
As well as lessons on saving, teach your children the danger of debt. Lucy Cohen, co-founder of online accountancy service Mazuma, says: “Go into the consequences of buying things you cannot afford and becoming reliant on credit.”
Teach children how interest rolls up if you do not pay it off in time, until it races out of control.
PUT THEM IN CHARGE
Emma Hammond, financial planner at wealth management firm Charles Stanley, suggests putting children in charge of the family budget for a week or even a month, under your supervision, of course.
“Talk them through your income and regular costs, such as household bills, food and clothes, and extras such as dental appointments, school trips and sports clubs.”
At the end of the month, discuss their experiences.
CHARITY BEGINS AT HOME
Laura Laidlaw, head of customer savings at Standard Life, says you should teach the importance of giving.
“As a family you might have a favourite charity you support, alternatively, awareness days and events like Comic or Sport Relief are a great time to discuss donating.”
FRAUD WARNINGS
Your children may be more tech savvy than you, but also more casual about sharing personal information on social media or email, Laura says. “Warn them that their bank would never ask them for personal or account details by email or text.”
IT’S DIFFERENT FOR GIRLS
Vivi Friedgut, founder of student financial wellbeing company blackbullion.com, says women earn less, save less and invest less, and have less money at retirement as a result.
“Teach girls to take responsibility for being financially independent. Talk about the opportunities money provides rather than the stuff it buys.”
If you have a flippant attitude to managing your finances, chances are they will too Cathy Crewdson
INVEST TIME IN THEIR FUTURE
Educating children about pensions and investments won’t be easy, but should pay off in the longer run.
Emma-lou Montgomery, associate director at Fidelity International, says setting up a junior ISA which will pay out at 18 can give them a healthy start.
“While cash seems safer, shares should give a higher return,” she says.