In a recent newsletter competition, we had asked our members “What advice would you give to your younger self?” Our winner, Leah, said, “I would tell my younger self that although having fun is the best thing to do, while you are young and able. Rainy days will always happen when you’re least expecting. A few pounds a month adds up over the year. Don’t be afraid to say you can’t afford something! Be proud that you are saving for your future and not being frivolous for today.”
This has been quite valuable advice as it makes people aware that they need to save for a rainy day and be assertive if they can’t afford something.
By teaching children at a young age about good money habits, they will always be grateful that you taught them how to be responsible with money, a valuable life lesson.
Here are some ways that you can teach them how to develop good money habits:
Be a good role model by being responsible with your own finances
Children observe and emulate what the grown-ups around them are doing. Showing your children that you have set financial goals, created a budget, made a shopping list (and sticking to it) and finding ways to save money will have an automatic positive impact on how they perceive your attitude towards money.
Go back to basics with cash
Earning pocket money is still common where children get paid for completing chores or for rewarding good behaviour.
By showing your children the value of money, they will appreciate it and make them feel grown-up.
Also, take them shopping when you go so that they can see how a shopping list works and what the receipt looks like in the end. This will show them the importance of a shopping list and budgeting.
Open a Junior Savings Account
By getting them a Junior Savings Account, you can show them how their savings are growing. This would also be a good time to start talking to them about what they would like to do with their money in terms of future planning. This will instil a good saving habit that will stay with them into adulthood.
The concept of spend, save, give
If you are rewarding children with pocket money, show them the concept of spend, save and give.
How the concept works
Divide the money into three portions as follows:
- Spend – agree with your child as to how much they will spend on something of their choice.
- Save – the second portion is saved for a goal that your child trying to meet or for long-term saving which you may have put into the Junior Savings Account.
- Give – encourage them to use of their money to help others. For example, you can give some money towards a charity of your choice or through awareness days and events that they come across such as Red Nose Day. This is a good opportunity for you to talk to them about donations.
Give your child the independence to make decisions as to how they will spend their money.
You can give older children pre-paid debit cards so pocket money can be paid straight from your bank account to theirs. You can control their spending limits and see how much they are spending and what they can buy.
While you do this, you can talk to them about setting a budget and make them aware of their spending/how much is left in the account. This will teach them how to be cautious when spending and track their spendings.
Teach them that they need to protect their personal information as much as spending and saving.
Ensure that their identities are protected online by keeping an eye on their social media accounts and making sure that they know the dangers of sharing any personal information on any digital communication channels.
Also, let them know about scams both offline and online. For example, that they shouldn’t share passwords or account details if somebody asks them.