Why it’s important to teach your kids about money

In a study commissioned by Experian, 60% of parents are concerned about their children’s ability to successfully manage their finances^[1]

When it comes to teaching your kids about money, it’s not just about making sure they can count it. It’s important that they understand the value behind it and the importance of managing it. Of course, you should be teaching them different things at different ages. The older they get, the more responsibility they’ll have to manage their own finances, but teaching children about money can start early. Let’s break it down into a few age groups and discuss some good techniques to try.

Under-8s

It might seem like this is too young to be learning about money, but the Money Advice Service recommends that “helping your child to understand and respect money from an early age will help them manage it better when adult.”^[2] Like with any subject, learning about money at this young age should be fun. Small jobs like counting out the money before a trip to the shops or giving them an incentive like finding the exact change for their favourite sweet can start to show how money works and its value.

Kids can play games with money too, like running a pretend ‘supermarket’, where taking money can help your child improve their basic arithmetic skills, as much as learning about money itself.

8-12

For children between the ages of 8-12 money can be a short-term thing. They’ll receive it and instantly start thinking about what they want to spend it on. Teaching them to think longer term will set them up well for when savings become more important later in life.

An incentive to save here could be telling them that if they can keep a hold of the money which they received for a week, you’ll increase it by 10%. This could then give them a choice of spending instantly or holding off and gaining more.

With technology being so popular these days among kids, there are apps out there that can help them improve their knowledge on money. Apps like Savings Spree can teach kids about how the choices they make each day can add up to big savings. Another app, Bankeroo can teach kids about the value of money in a simple and fun way.

13-16

Money management should start to come into play as your child becomes a teenager. Fortnightly or monthly instalments of pocket money can help them think ahead and plan how they want to save. You can also offer them an incentive of extra income in return for work around the house, which will teach them that doing a good job can help them earn. They can set proper financial goals and you can help them reach them.  

As they get older, it could be a good idea to gradually expand their pocket money, but get them to budget for clothes, toiletries etc.^[2]

Being a teenager, they’ll also need to learn that it’s not just a magic money tree of mum & dad. Their phone bill may be paid for, but they need to be responsible with how they use it and make sure that they’re not going over on data or minutes/texts allowances which could leave their parents with a nasty bill.

16+

Being a 16-year-old can come with a feeling of independence, especially financially. They may have to cover some of their own bills, pay for their own shopping or days out, and helping around the house may not be a paid incentive anymore.

They may now have their own source of income through work. It’ll give them more responsibility and they’ll learn to appreciate the money more, knowing that they’ve worked for it. Creating a budgeting plan can help them massively, especially if they’re getting their first proper wage. Make sure they know their outgoings for the month and they can plan accordingly. Doing this will help them understand how much money they have leftover to spend on things they enjoy.

Leading by example is a great way to help your kids learn about how best they can manage their finances and will prepare them well for later life.

The Cashplus Bank Account offers additional cards for ages 13 and up, which can be great to help your young ones budget and keep their money safe.

Sources

[1] https://www.experianplc.com/media/news/2017/lack-of-confidence-holding-british-parents-back-from-talking-to-their-children-about-money/

[2] https://www.moneyadviceservice.org.uk/en/corporate/you-your-kids-and-money  

This content was created on 28th June 2018