Six Tips for Teaching Your Kids About Money

The world of savings, mortgages, budgets and taxes is not the first thing you think of when planning a weekend with the kids, but it might be time to start introducing them to it. TISA has just announced a new initiative called KickStart Money, which aims to bring financial education to primary schools across the country. So, to give your kids a head start, here are six tips for introducing finances to them in an engaging way.

Savings

Giving children real world examples of what you are trying to explain is the best way to get their interest and to keep them engaged. Don’t just sit them down and try to explain the ins and outs of an ISA. Teach them in a way that will prove useful to them in the present moment and they are far more likely to retain that information. For example, when they ask you for a toy, don’t buy it for them straight away but enable them to save up for it either with their allowance or with parent pounds. Help them to work out how long it will take to save up for and discuss with them how they feel once they finally get it. Does it feel better to have waited and earned the money? Yourmoney.com discusses ‘How to have the ‘savings talk’ with your children’ in more detail.

Parent pounds

Just like monopoly money, parent pounds are fake notes that can be used to take the place of real money. It is up to you whether you make them just for play, or give them a real-world value, allowing your kids to exchange them for real money at some point. You can either find a template online to print or make your own. Depending on the age of your child, at a certain point using parent pounds is no longer effective as it can come across as patronising and childish, detracting from the overall message.

Budgeting

You don’t need to break out the abacus to teach your kids about budgeting. You can make it fun by making it an activity instead of a lesson. Whether they are playing at shopping in the living room, or accompanying you on your weekly shop, give them a little money and a list of what they need to buy. When they come back you can discuss how it went and talk about what they bought. Did they stick to the list or did they spend it all on sweets? By giving them the independence to make decisions on their own, rather than being involved in every moment of the game, they learn from the experience more quickly. Next time they can write their own shopping list, working out a balance between what they need and what they want to buy. You can adapt this to different ages and abilities, giving them a sense of the value of money.

Keeping track

If you give your child pocket money or a regular allowance, teaching them how to keep track of their money is a valuable lesson. It not only instils useful skills for the future but also allows them to make the most of what they have. With regular money gifts from relatives and friends, their money can quickly add up, but if it is not carefully spent it can be gone in a flash. Teach them to monitor how much money they have on an app if possible. The combination of money and technology is bound to keep their interest. By clearly seeing how much money they have and are likely to have in the future they can plan how to spend it.

Priorities

Once they have a good understanding of their finances, whether they are real or parent pounds, they can begin to learn about how to prioritise. Anyone who has ever read a child’s letter to Santa Claus knows that from a very early age children have a long list of things they want. When they are faced with the ability to choose what they can have for themselves their priorities quickly become clear. This is an important lesson for the future as it not only teaches them how to budget and save, but it also shows them that some of the things they thought were very important, aren’t so important after all. Ask them to list the things they need, along with their price and how long it will take to save up for them. When faced with a calculation of weeks, months or even years, they will be able to decide whether it is worth the wait and cost.

Buy now pay later

The concept of loans, interest and debt is a more complex one to address, but a vital one. You should teach them about how it works but also about the consequences. You can do this by creating a make-believe scenario, or discussing a real-world loan, such as a logbook loan from Car Cash Point. Lay it out simply on a piece of paper, calculating the amount of interest you have to pay. Next time they want to buy something, buy it for them, giving them a make-believe loan and asking for a payment each week. You can then discuss with them how it feels to already have the toy or game, but still be paying for it, possibly long after they have stopped playing with it. This not only teaches them about money lending but also about the real value of something.