One thing that many parents often neglect is discussing money with children. You’re not alone as many moms and dads do not think money should be discussed with children, which, in effect, goes against the reality of society. Encouraging good financial habits reduces the potential for young adults developing detrimental relationships with money. Here are some of the ways to encourage your kids to develop good saving and spending habits.
Reward them for saving
You might remember you always got a little piggy bank where you would scrounge around the house for every penny you could find. This is something which all parents should continue to do as this is something that you can start from a very young age. Another good example is when buying back-to-school essentials. Teach them to differentiate between needs and wants at this stage. Set the shopping list with essentials and stick to it. However, ensure to include them in the creation of this list while also showing them the exact budget. This way after the shopping trip, they can see how the money was spent.
Give them a balanced allowance
A weekly allowance is an excellent method. The general rule of thumb is that you would go for £1 per year, meaning that if your child is a seven-year-old, they would get £7 per week. Obviously, it isn’t a one-size fit all kind of budget and you can adjust it according to values, rules, and own family budget.
Open their first bank account
When your child starts secondary school their piggy bank should be replaced by a bank account. Obviously, you could open a junior ISA many years in advance as a future financial back-up when they are older. Teaching them to manage a bank account and to save to something they want while still in their preteen years, avoids unnecessary future financial woe. This way you also teach them about the concept of interest and when unspent, how it can accumulate.
Allow them to start earning their own money
The only way to truly learn the value of money is through hard work which could be immensely rewarding for young children. From a young age, depending on age obviously, give them little tasks or chores around the house and reward them. They will be able to supplement their allowance and teach them the value of working. Older children can use other creative methods including getting a summer or part-time job.
Discuss essential expenses with teens
Anywhere between 12 and 13 years, is the right age to learn more about complex financial concepts. If they have a job, discuss why money is withheld for tax purposes, explain why and where the money goes. Talk to them about larger expenses or unexpected expenses and even post-secondary education tuitions and discuss investments, pros and cons.
Wise spending and saving habits are important aspects of money management. The best way to enable children to develop solid financial skills is through age-appropriate practical lessons that you adapt as they grow older.