No more Bank of Mum & Dad?
One of the main things in life that parents want is for their kids to grow up to become happy, healthy and financially self-sufficient.
From previous research* we found that 24% of children who are given pocket money receive between £5 and £9.99 - meaning children who receive it on a weekly basis, the most popular time period, are potentially pocketing £520 a year. Just a fifth (20%) of parents do not give their children any pocket money, and 8% of children are only given spending money when they need it.
The Bank of Mum and Dad being available as a constant cash machine probably isn’t a situation that you’re keen on. This is why it’s important to encourage teenagers to make, manage and respect their own funds. On to the ten tips that could help mould your teen into a financial guru!
1. Be open about your own finances
Explaining where the family’s earnings come from can really help children’s appreciation for money. It’s natural for children to think that money is infinite, so explain that you have earned it by working. This is a great lesson for children of all ages but you can take this to a deeper level that will engage teenagers.
Show them pay slips, how tax is deducted and how things like Direct Debits work once you’re confident that they will understand it. Try to avoid using phrases such as ‘the money tree’ and explain that just because money is on a card and not physical, it isn’t infinite.
It’s easy for children to understand bills such as grocery shopping and buying clothes but they may be oblivious to bills such as Council Tax, the water bill and the difference between rent and a mortgage.
2. Set a good example
If you’re making impulse buys, or always going for the more expensive option, children will notice and start to adopt the habits for themselves. If you practice what you preach and are smart with your own money then children are more likely to follow suit.
This can be started from a young age and you can start to involve teenagers in decisions to do with household policies such as the internet to show them how these things work and what the payment options are. Explain why you are choosing certain products that fit within the family budget and why you are choosing to pay as you are.
3. Regularity is the key
Our research also found that around a fifth (21%) of parents admitted to not having a set pattern when it comes to their children receiving pocket money. If you are providing your child with pocket money even when they are a teenager, ensure that they have regularity so that they don’t just expect to receive it when they ask for it. Whether this is weekly or monthly it will help them to ensure their money lasts if it is not topped up once it’s spent.
4. Save, save, save
Saving is another key skill to teach your teenagers and a great way to do that is by setting a good example. If your teenagers see you putting money away for something in particular they may be more inclined to do the same thing. Plus, if they are told to save for a bigger item that they want such as a games console and you don’t just buy it outright they will learn that savings increase over time and they will eventually get the satisfaction of buying something they’ve saved for. Savings could be done with an online or in branch savings account or a good old moneybox.
5. Encourage earning
From chores around the house to a paper round or their first part time job, encourage earning their own income as soon as you can and they will learn the value of money faster if they are earning it themselves. Once they are earning, encourage saving, talk about budgeting and what they are going to spend their money on. You could reduce pocket money when they are earning themselves and transfer money into a savings account such as a Junior ISA for them instead.
6. Don’t be afraid of technology
Of course, as parents we’re sure you spend a lot of your energy trying to get your teens away from technology and screens but bear with us for this one. There are apps on the market that have been created to help parents look after their children’s money alongside them. They are comprised of smart phone apps and pre-paid ‘debit’ style cards that are topped up by parents. They can include parental controls such as;
Within the apps, there can also be helpful features such as tasks to tick off and chore trackers for all ages in order to encourage your child to complete chores and earn their pocket money. These features may require a monthly paid subscription.
- Where the cards can be used i.e in store or online
- Excluding certain retailers or websites
- Instant smartphone notifications money is spent
- The ability to block the card if it is mislaid
7. Introduce a treats budget
We assume that you’re not expecting your teenagers to pay for everything themselves so, if you’re still planning to treat them when they succeed or for their birthdays and Christmas, consider introducing a budget for these things where they can trade amounts. This may work if your child is engaged with gamification.
For example, if they see something big that they would like, ask them if they would like to take some money from their ‘birthday fund’ to help pay for it or, if they’d like to wait and save up for it. This again reinforces that money is not an endless pot.
8. Teach them how to pay their own bills
As soon as they have their own things to pay for such as streaming subscriptions, phone contracts or other regular payments, perhaps from the age of 18, encourage them to manage their own cash flow and not rely on you to pay bills for them.
9. Look into the future with them
From late teens they may be thinking about their future, moving out or going to university. Encourage them to educate themselves about accounts such as the Lifetime ISA as this account can be opened from the age of 18 and things such as their student loan and how this will affect their finances in the future.
The Lifetime ISA is an account for first time buyers for their home and can also be used to save for retirement once a first home has been purchased. It can be opened between the ages of 18 and 39 and gives a 25% bonus on deposits up to a £1,000 bonus. This means that once 18, your children can save £4,000 per tax year and receive a £1,000 bonus from the Government plus interest. A Lifetime ISA can be opened with £10 online or in branch.
10. Job prospects
Whilst you prepare them to be great with money with these tips it’s also a good idea to encourage them to find a career that they will love so that they are financially independent when they do leave home. To widen their ideas about career prospects;
Introduce them to lots of people with different careers in your life and ask friends and family to explain their job to them, this can help open up doors and careers that they may not have heard of.
Remind them that they could still be surrounded by a passion such as football by working for a football club, becoming a coach or a sports teacher if they have their heart set on being a footballer and this dream doesn’t materialise.
Encourage work experience from a young age as well as a part time job so that they can experience different work environments and discover how they thrive best.
Visit our Career Academy for more insight on the jobs that our team do here at The Nottingham.
For tips on how to educate younger children about money, needs and wants and cash flow, visit our Money Academy virtual classroom for lots of lessons. We also have a great article called '9 money lessons to teach your kids today' if you’d like to read a little more about the subject.
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