Children's budgeting tips
Adding money matters and financial education to children’s school curriculum has been a hot topic in recent years. The first financial textbook for 15 and 16 year olds hit English schools in November 2018, written by the cash-savvy owner of MoneySavingExpert.com, Martin Lewis. If both schools and parents make a conscious effort to educate and inform today’s children about everything from AER to savings accounts and right through to pension advice, the future generation should be well on their way to being money experts themselves! But, what money lessons can you teach your own children as a parent?
1. Set savings goals
From an early age, it’s a good idea to encourage your children to save for the bigger things that they want. Once they have a goal in mind, help them work out how much they ‘earn’ from their pocket money and then see how long it will take for them to save up for the item that they want.
Try savings jars as an activity when they are very young if they are wanting multiple things such as toys, games or even special trips to their favourite activities or restaurants. Encourage them to divide their money from pocket money earnings to birthday gifts between their jars and they’ll soon understand that you have to spread money between different pots. View The Nottingham’s range of children’s savings accounts if they are under 18. A Robin Hood Young Saver can be opened with as little as £1 and your child will receive a goodie bag. They can deposit up to £100 every calendar month and the account matures on 31 January 2020. As their savings grow, so will their collection of money boxes.
2. Create and share a budget
If you showed them roughly how much something like food shopping costs and then what the family income is, they will have more of an idea about where money goes. As children, they may feel like money is in endless supply if they don’t see the earnings and outgoings for themselves. This way, they can see what the money you earn pays for and help them to understand how to handle money. To get them even more involved, you could create shopping lists and task them with finding the best value or lowest priced product to really include them in the decision process and test their maths skills at the same time!
3. Introduce a pay-day
When it comes to teenagers and they have their own bank accounts, consider introducing paydays for pocket money. Some parents, for example, transfer their monthly child allowance straight to their children - this works for frugalfamily.com where owner Cass says she believes that older children ‘need enough money to be able to spend, save and to make mistakes with’.
Giving teenagers monthly money means that they will have enough money to buy bigger items if they would like to and, they will have to think about how spend their cash over the month. This is opposed to blowing a weekly budget in one go because they know they’ll get the same amount next week, they’ll learn how to budget for a longer period of time.
Increase paydays from weekly when they are younger, up to fortnightly and then finally monthly as they are finishing secondary school. Their earnings will grow with them and get them ready for the ‘real world’ of salaried pay.
4. Personal financial responsibility
If they want something that is expensive and it’s not the time for a birthday or Christmas treat then offer to pay what you, as a parent, can afford and they must make their own financial decisions.
For example, if they are given £15 towards a piece of clothing they have three decisions;
1. To use that money solely to buy the product
2. To buy something cheaper and have change
3. To buy something more expensive and have to pay some more themselves.
5. Let them make mistakes
Even when they are small, give them low amounts of money to make mistakes with. An example of this is if they picked a drink in a shop but realised, after opening it that they didn’t like it. This is their mistake and they should realise that they can’t get another one bought for them as the money has now been spent.
6. Show children what real life costs
When they are old enough to look after money in their own purse or wallet, this is a great time to show them how much day to day life costs.
Head out for a full day of activities and ask them to pay for themselves instead of being paid for as would usually happen. Obviously, this is either pocket money or something that you are funding but by physically paying for it themselves they will realise that things cost money to do.
Start with their bus fare, then their entry for a swimming pool or cinema ticket and then finally their lunch afterwards. Once they’ve seen that the money they had is gone but they have received services, experiences and products for that money, it will become more real that money is used to exchange for things that we want and need.
7. Don’t be a spoiler
Carrying on from the above point, children must understand want vs need. It’s OK to say no when they ask for the latest thing on their wish list but avoid saying that they can’t have it because you can’t afford it. This gives off the signals that you are not in control of the money which can create anxiety for yourself and your child.
Try to explain to them the difference between want and need with your own examples that are relative to your lives and their experiences.
8. Use technology
With new apps and online banking current accounts you can easily see your balance increase and decrease by the touch of a button or the swipe of a card. By showing children that once you buy something, the money is instantly taken away this can help show them that ‘virtual’ money is just the same as physical money. This will help reinforce that when money is gone, it’s really gone. Cash will be used increasingly less as children get older so it is important for them to see physical cash and balances on screens as the same thing.
9. Understand that you are an influence
Finally, know that your children will most likely follow in your footsteps and to your example when it comes to money. Research that the Money Advice Service has done suggests that adult money habits are set by the age of seven. It’s a good idea to limit the amount of shopping trips as a fun activity as they will start to have the same resonance with them as a free fun activity such as a trip to the park. This way, they should learn that money is not an unlimited resource and that shopping trips are a treat.
There we have 9 small tips to help us all on the way to a brighter financial future!
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