Make Money Make Sense For Your Children

by Adam on October 19, 2017

What is a Junior ISA The sad but simple truth is that we don’t know what the future will hold for our children.

We cannot be the arbiters of their success or failure in life. We can’t make their decisions for them and we can’t insulate them from unfair or unjust things that may happen to them through no fault of their own. All we, as parents, can do is give them the tools, skills and infrastructure to deal with what life throws at them as best they can. This goes for friendships, for relationships, for jobs and careers… And it goes double when it comes to money. We are, at present living in a very uncertain time in the UK. Brexit’s implications on the national economy are only just beginning to be felt and its effect on the labour market, business, GDP and the opportunities that this will have for our children’s financial opportunities will likely take years to be fully realised.

In such a financially turbulent time, it’s never too early (or too late) to start educating your children on all matters monetary to help ensure a stable future for them and their children. While nobody expects your average three year old to understand the complexities of international loans, fiscal multipliers or inflation, there are still a number of ways in which you can encourage them to have a healthy respect for and understanding of money and give them the tools that will enable them to grow into financially responsible adults.

Here are some ways in which you can engender this from a very young age while expanding upon it as your children get older…

ImportantEncourage saving by making it fun

If you’re a very young child, the concept of saving is a tricky sell. Most 2-4 year olds have a vague understanding of money as a commodity but they tend to understand it to be something that’s exchanged for fun stuff like toys and sweets… And kids want toys and sweets. If you start giving your children pocket money from a young age (there’s no ‘right’ time, but the earlier you start, the more opportunity they have to form good financial habits), they’re likely to want to spend their money straight away. The hard part is getting them to understand the benefits of delaying their gratification.

The best way to do this is give them an incentive to save. Get them to focus on something they really want (more than sweets). Explain that you’re not going to buy it for them, but if they can exercise restraint and save their money, you will match their contributions. You can even help them draw a fun chart to help them track how close they are to achieving their goal.

Deal in hard currency

When you think about it, money is quite a nebulous concept. Its value used to be determined by the value of gold but now its value is determined by far more disparate elements. It’s a tricky concept for an adult to understand much less a child, and dealing in contactless payments and Apple Pay can only mystify money further for them. Thus, it’s advisable to deal in cash when buying products in front of your children so that they get a genuine sense of currency lost and its value in relation to the products it buys.

If your young child wants to play ‘shop’, as many do, use this as an opportunity to get them used to handling real money rather than play money.

ConfidenceBe honest about the family finances

As children get owner, the things they want for Christmases and birthdays become more and more expensive and in some cases your household finances may not be conducive to them getting what they want. To a child this is grossly unfair and they’re likely to treat it as an agenda against them personally. You can nip this mentality in the bud by being as open and honest as you can about the family’s finances, delineating in as much detail as you’re both comfortable with where the household income goes every month. This will dispel the odd assumption that children nurture that adults are all infinitely wealthy.

Teach them the importance of budgeting

Budgeting is the most important aspect of any household finances and if children are able to grow into financially independent adults they need to appreciate its importance. This can be gleaned by going over the household budget as above or (better yet) encouraging them to make their own. Even pre-teens can benefit from learning the value of budgeting so that they can prioritise their expenses and assign money to spending and savings accordingly.

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