As the cost of living goes through the roof and many of us need to rein in our spending to cover those household bills, parents may be wondering how to chat to their kids about finances.
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Giving children an early financial education is brilliant for teaching them the value of money and instilling good habits for their futures. But how do we approach the subject to get the important points across and hold their interest?
Personal finance expert Kevin Pratt of Forbes Advisor has put together some clear and practical advice for parents on teaching their children a key life lesson and setting them up for success. Read his six tips below…
Set a good example
Kevin says: "If you want your children to develop good financial habits, you should try to practise what you preach.
"You can teach them to respect money, that it is not to be taken for granted, and it is certainly not in limitless supply. That might on occasion mean saying no to their requests, but this in itself is a good life lesson."
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Start with the basics
"It’s going to help children get to grips with the world of money if they know about the different coins and notes we use, and how much different things cost. Even if they’re using play money, they can learn about transactions and sharpen their arithmetic skills.
"But they also need to be aware of debit and credit cards and electronic means of payment such as digital wallets, especially if they see you using these when you’re shopping.
"You can also talk about the concept of shopping and paying for things online - and the importance of avoiding scammers, fraudsters and rip-off artists."
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Encourage them to earn and save
"Give your children the opportunity to earn rewards for their hard work, by offering them an allowance for completing specific chores or tasks around the house. And once they are earning that money, provide a place for them to save it too.
"It’s important to teach children from a young age that money isn’t just for spending - they should be saving money regularly if possible. A piggy bank is a good place for spare cash, and they can have their own account with a bank or building society if you open one for them."
Set saving goals
"Helping your kids to define a saving goal, whether short or long term, is a great way to keep them motivated - and teach them the value of putting money aside with a specific purpose in mind.
"For younger children, short-term goals may be more beneficial, for example, saving for a toy they really want. As they get older, you can then start to introduce longer-term goals for higher value items, such as a games console, musical instrument or excursion.
"Parents can even add additional incentives to encourage children to save more money, such as agreeing to match the amount they save."
Encourage budgeting
"If you give your child spending money every week or month, remind them that they might want to budget until next 'pay day', rather than spend it all at once.
"This is a hard discipline to master and they might not readily get to grips with it - let’s face it, many adults regularly find that there's too much month left at the end of the money. But anything you can do to help them understand you can only spend money once - and once it’s gone, it's gone - will be valuable."
Take advantage of technology
"There are a number of financial apps targeted at children and their parents to assist in financial education.
"These can provide tips and guidance in a way that children will understand and appreciate. Make sure to involve them in the selection process if you can - an online environment is very much a part of their lives, so it’s important to have buy-in from the get-go."
