Have you ever had that feeling of managing finances might not have been so complicated if you had learnt about it in school? Many of the tips and tricks used to budget, save and invest are simpler than they seem, yet many people are reluctant to talk finances, an attitude which could end up costing them dearly.
As with many things in life, the easiest way to get people comfortable with financial matters is to start them young. No, we’re not saying you should get your child to learn about mortgages and make them take out a loan… But why not teach them some important money lessons that will help them for life?
Here are our top five financial lessons that your kids will thank you for teaching them:
1. How money works
Whenever you go to the shops and buy something, why not talk to your child about how much it costs and how you paid for it. Make sure your child understands that when you pay by debit and credit card, it’s not magic – it’s real money too!
When you’re going round the shops, why not talk to your kids about the special offers and sales on offer… Tell them the pros and the cons, and help them to avoid the traps set by the shops (such as putting the sweets right next to the till in the hope that pester power will prevail!).
2. How you earn money
How many times have you heard (or said), “Money doesn’t grow on trees, you know!”? Well, that may be true, but you also need to teach your children where it does come from. You can teach your children how you earn money, as well as encouraging them to do a few odd jobs or help out a neighbour for a bit of extra pocket money.
Don’t forget that kids are also hugely creative – why not give them a certain amount of money and encourage them to use it to make more money. Maybe they’ll buy some ingredients to bake cakes and sell them at a profit, or maybe they’ll come up with something entirely different – but it’ll be fun for everyone to find out!
3. The difference between spending now and spending later
So we’ve already mentioned pester power. It can be the cause of many a tantrum, but it can also be avoided if you teach your children to take control of their own money. Why not give your child an allowance which they can use, for example, to buy any sweets they want?
You provide them with their usual diet, but any extra treats come out of their allowance. Then explain that they can spend it all on sweets right away, but then they will have no money left if they want more sweets next week. If they only spend half of it on sweets, they will have saved some money to put towards that big toy they’ve wanted for months!
4. How to manage your income
Continuing from the last lesson, why not teach your children how to manage their own allowance, so they understand the consequences of saving and spending. Rather than just putting all of their pocket money into one piggy bank, why not give them four: one for spending, one for saving for little things, one for saving for big things, and one for giving to charity. Let them decide how much to put into each, with the help of the money lessons you’ve been teaching them.
5. How to budget
Budgeting is a great way to teach your kids about how to manage their income, and it is a skill that will come in useful as soon as they fly the nest. Why not have some fun with this one, and take some pressure off yourself at the same time? Let your child plan their own birthday party, but give them a strict budget for it. Encourage them to shop around for bargains and to think about what they really need for the party.