It’s never too early to start learning about your finances. Find out the top financial lessons you can pass on to your kids, and how to make it fun.
One of the most important financial lessons to teach your kids is how to save. Set savings goals with a clear reward once the target is reached, like that new toy they’ve got their eye on. You can even stick a picture of what they are saving for up in their room or on their money box to motivate them. As an extra incentive, why not offer to match what they’ve saved when they reach a certain amount?
If your children are younger and don’t have any money of their own, you can start introducing the concept of saving using non-monetary rewards. Why not give out stickers for good behaviour that can be traded in for a toy, a day out or saved up for a bigger treat?
You can start teaching kids the basics of budgeting from a very young age just by playing shops with the contents of your kitchen cupboards. Give them some pretend cash to spend and help them work out what they can and can’t buy with it.
Having multiple money boxes or jars is a good way to help visualise budgeting. Have one jar for spending money, one jar for short-term savings (like a new toy) and one for longer term savings (like holiday spending money). Help them divide their pocket money or any other cash they are given into the jars to help them understand that they can’t always have enough money for everything and they sometimes need to prioritise.
As your kid grows, you can teach them to budget by giving them their pocket money fortnightly or monthly rather than weekly, so they have to plan ahead and make it last longer.
Don’t worry, we’re not suggesting you send your children out to work, but it is a good idea to start introducing the idea that money doesn’t grow on trees – it has to be earned. Why not pay your kids to do some small chores around the house, or offer to supplement their pocket money if they complete certain tasks like making their own packed lunch or looking after younger siblings?
Teaching kids the difference between things they want - like the latest must-have toy - and things they need – like food - can be tricky. It’s good to chat about the idea and you can help demonstrate the concept while doing the weekly shop, by explaining which items in the trolley are ‘needs’ i.e. fruit, veg and milk, and which are just ‘wants’ like chocolate biscuits. Another fun way to illustrate the concept is to help your child cut out pictures of various items from a magazine and sort them into need and want piles.
While teaching good financial behaviour is important, it’s also really valuable to let kids make some mistakes with their money. They almost definitely will as they get older, and they need to be prepared to deal with the consequences and hopefully learn to make smarter decisions in the future. So next time your little one wants to spend their pocket money on something you think will fall apart 10 minutes after leaving the shop, let them get it rather than trying to sway them towards something you’d prefer them to buy.