Get your family finances in line

Learn valuable money lessons to pass on to kids

Happy Father’s Day to all the dads reading. I love being a dad – and even as an experienced financial planner, raising my kids Olly and Bella has taught me a lot about family finances.

On average, a couple will spend just over £75,000 raising a child from birth to 18 years old, according to the Child Poverty Action Group.

It’s a hefty sum, but that figure doesn’t include housing or childcare costs, which can double the amount.

It’s no surprise that raising kids comes at a price – but it’s also a great opportunity for both children and parents to learn.

Lifelong lessons

Pocket money is a brilliant way to start teaching children about finances. With a few simple systems, you can give your kids an education they won’t get at school.

First, base the amount they get on their age – say, for example, £2 per month for each year of their age, so a 10-year-old would get £20 per month. This keeps things simple.

Second, split their needs from their wants: You buy what they need, and they buy what they want.

Third, link pocket money to doing chores, such as taking out the bins or tidying up. This teaches kids that we have to earn money – it’s never given away for free. There’s more on this on my website, warrenshute.com.

For their birthday, buy a single share in a company and watch its value change

Early investments

Childhood is a great time to start a habit of investing for the future.

On their birthday each year, buy a single share in a company they know and like and watch how its value changes over time.

Granted, this isn’t the best investment strategy, but it’s a great lesson for kids to learn.

If you don’t want to actually buy the share, do it virtually, noting down the share price on the birthday and comparing it 12 months later.

Alternatively, set up a free virtual account at londonstockexchange.com.

Protect your income

Insurance may not be your idea of family fun, but it’s so important.

If you have kids, a Family Income Benefit plan is essential to protect your family from the loss of income, if the worst were to happen. It provides a tax-free payment to your family in the event of premature death, replacing your salary, and is often less pricy than straight term assurance.

Make a will

Wills are not just for when we get older. If you have dependent children, you must make a will.

Yes, it’s a legal document that tells people what to do with your estate and belongings when you pass – but much more importantly for parents, it details who should care for your children.

If both parents pass away without a will, social services will step in to look after any children at a time when the kids want and need to be with people they know, trust and love.

For more information, search for the Money Planner podcast online.