There may be a million and one things on your mind if you are a busy parent with a growing family. Worrying about their health, nutrition and schooling to name just a few. However as your children take their first steps into the teenage years, we should be gearing them up to understand about finances. Learning how to save, understanding the value of money and the true cost of living, what their credit score is and how to build up a strong relationship with the bank. These are all vital parts of adult life and now is the time to install some great habits into their growing minds.
It sounds silly that you may need to teach someone how to save. It’s just popping money into a piggy bank and not spending it, right? Ok so the black and white of it is really simple, however applying it to everyday life is a little harder.
Most children will have a piggy bank in their bedroom from a very young age, so will see how a few small cents and grow into a few bigger dollars. Of course when they are five or six they aren’t really going to understand the importance of what they are doing. However, by ensuring your child regularly pops money into their piggy bank means you are helping them to form a habit. As with healthy eating and exercise, good habits stick with you as much as the bad ones.
You’ll probably start with popping birthday money or Christmas cash into their savings tin. However when they get a little older, you can start the basics of teaching them the value of money and how hard you need to work in order to earn it. Instead of giving your children pocket money or an allowance, set them tasks so they can earn money. Dependent on their age there are a variety of things they can do. For younger children it could be something as simple as helping mum or dad lay the table, or getting themselves off to bed in the evening. For older kids you can include house chores away from their own bedroom, such as hoovering, walking the dog, taking the trash out and washing up. Bear in mind that your kids can probably use an iPad or mobile phone better than you, so assuming they can learn how to operate the washing machine isn’t expecting too much!
Don’t just tell them their chores and then pay them on completion. Instead give each chore a value. For example pushing the vacuum around the whole home could take a while, so you could place the value of $3 for doing a good job. Washing up is a pretty quick job, especially as most households have a dishwasher, so for that you could apply a $1 payment. Make a list on a family pinboard and then explain they need to choose a set amount of jobs a week. You could suggest a minimum of 3 and a maximum of 6 jobs. That all depends on you. By attaching a price to the work you are showing your children that they have to work pretty hard to earn a little bit of money. By giving them the option to choose a min or max amount, you are helping them to see that you can earn more by working a little harder. This will show them that nothing comes for free and that certain work will return you a better pay as it requires a little more skill. You are also giving them the freedom to make their own choices whilst highlighting there is always a set of rules you need to sit within.
Now, to take this a step further when they hit their teenage years, you could ask your children to keep a note of the work they have done in their diary and then tell them when they have given you a record, you will pay them. Look at this as a kind of invoice system. They now need to keep on top of what they have done and have the responsibility of producing a record. Until they produce the record, they don’t get paid. It may sound like a bit of a chore but you could even give them a $1 bonus when they produce the invoice. This is teaching them to be accountable, to take their own notes of how much work they are doing and to ensure they are being paid the correct way. Instead of just trusting the person in charge to pay the correct money. It is never too early to teach your children these lessons. It will also help them to improve their maths, handwriting and awareness.
As soon as they are old enough to have a bank account and payment card, get them one. Make sure you keep a close eye on it with them but insure you do it together. You can have payment cards which you set a spending limit on, meaning you don’t have to worry about them nipping into town after school and spending all their savings on a new bike. However it allows them a little freedom to buy some low value items.
When you open the bank account set up a standing order from that account direct into their savings account. The ideal balance is to allow children to spend a little of what they save, but teach them to invest the rest for a rainy day. Of course you will need to discuss what a rainy day really is. Talking about the future, a new car and their first home, is a good way to highlight why savings are so important, however you also want to allow them to make a few mistakes when spending. The mistakes they make at this age will have a far smaller effect than the mistakes they make as adults. So if they are desperate to buy the next fad purchase, allow them. Then when it is discarded and ignored after a couple of weeks, talk to them about it. Try to show them that some purchases are more important than others.
By the time you get to this stage you will probably have pretty grown up teenage children, this is when you need to really nail home all the habits you have got them into. Encouraging children into some weekend work is a great first step. This allows them to understand the basics you taught them, in the real world. Moaning about chores in the house for 3 hours and then taking them on, will result in them getting paid but take them longer to earn. If they spend 3 hours moaning about work set by an employee then they might not get paid or, worse, they will lose their job. Let them learn this but gently guide and support them through the process.
When they get to driving age you can really start to show them about finance. It is a great opportunity to discuss their credit score, what it means, why it is important and how to take care of it. A healthy credit score is something adults rarely teach their children about, yet the ability to obtain credit opens so many more doors when it comes to purchasing a home, financing a car or getting them out of sticky situations.
You also need to teach them how to find the best deals for services they need. Using resources such as Money Expert’s car insurance service will show them how to use the internet to compare quotes and will help them see that going with the first offer could be costing them a fortune, or going with the cheapest might mean they don’t have all the cover they need. A good lesson that we should be looking for value for money over the cheapest services.
Supporting your children and buying them treats or helping them purchase a new car are all fantastic things that you can still do. It’s great, if you are in the position, to take a little pressure of the kids and is really nice to spend your money on items you know they will treasure, however if you constantly manage all your children’s spending and don’t allow them to master the basics, of saving and making purchases, at a young age then you could be helping them form bad habits and a negative relationship with money.
Be sensible, every child is different and they all learn in various ways. So take our advice as a guideline in helping you form a positive financial future for all of your children.
Of course, they very best way to teach them, is to lead by example. Keep your finances in control and make time to check you are paying enough money into your savings. Don’t keep everything hidden away from the children. Share it with them a little along the way. They don’t need to be exposed to your money worries, but you should involve them in the positive aspects of managing your own financial lifestyle.