How to teach your children essential financial skills
How can you safeguard your children’s financial future and raising money-smart kids?
As parents, we have a unique opportunity to teach valuable money skills to our children. By introducing healthy financial habits early on, we empower them to make informed decisions. In this blog, I want to explore some engaging and practical ways to teach your children about money, financial skills, and budgeting. Here are my hints and tips:
Money Basics
Introduce the concept of money to your children in a simple and relatable manner. Teach them about different coins and notes, their values, and how to make a purchase. Encourage them to count money and play shop games.
My children loved to be “money detectives”. When they were young, I challenged them to find two different items at a specific price. On its face, it seems like a simple game, but there are two underlying educational elements:
- Noticing prices is essential for being money conscious.
- Comparing prices in this simple way is a precursor to understanding value.
There’s a bonus too! A hands-on approach makes shopping and learning about money fun and interactive.
Pocket Money or Allowances
Pocket money is an excellent tool to teach budgeting and financial responsibility. Decide on an amount suitable for your child’s age and create guidelines for earning and managing the money. Click here for an article on the Go Henry website that has helpful ideas.
Encourage your children to divide their allowance into saving, spending, and giving categories. This instils the habit of allocating funds for different purposes, fostering a sense of financial control from an early age.
Go Henry is a helpful resource for parents teaching money sense.
Teach Saving Habits
Teach your children the value of saving by giving them a piggy bank or opening a savings account in their name. Encourage them to save a portion of their allowance or any monetary gifts they receive. Set savings goals together, such as buying a toy or saving for a treat. Celebrate their achievements when they reach their targets, reinforcing the importance and satisfaction of delayed gratification.
Child’s Play
My children love Monopoly. Amidst the laughter and friendly banter, they’re mastering valuable money management skills. The youngest’s eyes light up with joy whenever he collects crisp Monopoly money. Both children have learned shrewd decision-making skills when considering which properties to buy, rent, or mortgage. Negotiation skills are being honed without them even realising it.
It’s a game full of unexpected setbacks and windfalls, much like the real world. The thrill of passing “Go” and collecting £200, or the frustration of landing on someone else’s coveted property, teaches them the importance of saving for emergencies. And as they gleefully count their pretend fortunes, they learn about budgeting and allocating their resources wisely.
Encourage an Entrepreneurial Spirit
Spark your child’s entrepreneurial spirit by encouraging them to start a small business or take on money-making projects. Whether it’s a pet-care service or selling crafts, these ventures provide valuable lessons in money management, marketing, and customer service. They also cultivate a sense of self-reliance and the rewards of hard work.
The Importance of Giving Back
Teach your children the importance of charitable giving by involving them in philanthropic activities. Together, choose a cause they feel passionate about and engage in volunteer work or donate a portion of their savings. Giving to charity cultivates empathy, gratitude, and an understanding of the positive impact their money can have on others’ lives.
Money-smart teenagers
As your children mature, it’s important to expand their financial literacy. Prepare them for the challenges and responsibilities they’ll face in the real world. Here are some additional strategies to help you teach financial skills to older children:
Introduce Banking and Digital Tools
Introduce your older children to banking services, such as opening a current account or a prepaid debit card. Teach them how to manage their accounts, monitor transactions, and use digital tools for budgeting and tracking expenses. Encourage them to set financial goals and track their progress regularly.
Discuss Credit and Debt
Engage your teenagers in conversations about credit cards, loans, and the potential risks associated with debt. Teach them about interest rates, credit scores, and the importance of responsible borrowing. Help them understand the long-term implications of debt and how to use credit wisely.
Part-Time Jobs and Financial Independence
Encourage your older children to take on part-time jobs or engage in entrepreneurial ventures. Earning their own money gives them a sense of financial independence and responsibility. Guide them in managing their income, setting aside money for savings, and covering personal expenses. Emphasise the importance of balancing income and expenses to avoid overspending.
Explore Investment Basics
Introduce the concept of investing to your older children, explaining the potential benefits and risks involved. If you have good knowledge of financial products, teach them about ISAs and other investment options. Encourage them to start with small investments and explain the power of compound interest over time. Help them understand the importance of diversification and long-term investing strategies.
Modelling Financial Responsibility
Your actions speak louder than words. Be a positive role model by practising sound financial habits yourself. Involve your older children in discussions about family financial decisions, such as saving for holidays or making major purchases. This involvement fosters their understanding of financial trade-offs and decision-making processes.
Valuable life skills
By actively teaching your children about money, financial skills, and budgeting, you equip them with life skills that will serve them well into adulthood. The key is to make it fun, relatable, and age appropriate. Engage their curiosity, involve them in real-life scenarios, and celebrate their financial milestones.
Your children will develop a solid financial foundation with your guidance and support. Start talking about money when your children are very young. Be consistent and watch your kids blossom into financially savvy individuals.
Ready to empower your child’s financial future and ready to raising money-smart kids? Get in touch today, and let’s review your financial plan. My simple 6-step approach will help you achieve your family’s life goals.
