10 ways to teach your children about money
Despite the fact that all children will eventually have to learn how to manage their own finances, there is still a dismal lack of education on money matters available in schools.
But there are practical ways you can teach your child about money. Here, we outline what you can do.
1. Encourage them to handle notes and coins
When you go shopping, get your children involved in paying for your purchases. Don't always pay with plastic, otherwise they won't learn about the different value of notes and coins.
At home, lay out the various coins and notes you use and teach them how much each is worth – then turn it into a game with a reward when they get the values correct.
2. Use role play
Children love acting, so set them up as a shopkeeper with some things to sell. Get them to give everything a price of less than 10p and then count out the coins with them when you 'buy' something. At the end, add up everything you have 'spent' so that you have a grand total.
3. Get them to earn their pocket money
Many parents do this already, but rather than just handing over your children's pocket money each week, try and get them to earn it. Give each chore a value, so the more they do, the more pocket money they end up with.
4. Show them how to budget
We all need motivation to stick to a budget. If your children are longing for something, help them to save towards it by setting themselves a budget. This means they keep a proportion of their money for the short term and the remainder is saved up towards the item they wish to buy.
5. Explain the difference between 'wants' and 'needs’
Teach your children the difference between the things they need, such as food and clothing, and the things that they want, such as sweets, or the latest computer game. When they want to spend their pocket money, try to get them to prioritise, so they use it first to buy something they need, and then use any money that’s left over to buy something they want.
6. Get them a child's bank account
When your child is old enough to understand what a bank is, take them into your local building society or bank branch and get them to open an account. Then, every time they get birthday or Christmas money, take them in and get them to deposit their money in their account. Each year, when they get an interest statement, show them in notes and coins exactly how much extra money they have earned because they have saved rather than spent their money.
7. Compare costs
When you're shopping, get your children to compare the costs of items you are buying. Show them that by choosing a different brand, rather than just going for the first item they see, they can save money.
8. Get them to manage their own spending
A good way to help older children manage their own money is to allow them to use a pre-paid card. As their name suggests, these can be pre-loaded with a specific amount of money and used like a debit card. Once the money loaded on the card is spent, the card can be topped up with more cash and used again. It gives you control, as you can set an upper limit on what your children can spend and it also allows you to monitor where items are being purchased.
9. Show them your bank statement
When your children are a bit older, sit down with your bank statement and show them how payments come in and out, and point out things which might have pushed you to go overdrawn.
Keep receipts and ask your children to help go through them and cross off the relevant payments on your statement. The more used they are to checking statements regularly, the more it will become second nature for them once they have their own current account.
10. Explain interest on borrowing
Try to teach your children that when they borrow money, they will be charged interest. You could do this by giving them options when they want to buy something they really want. Tell them they can buy it now by borrowing money from you, but they will have to pay you back more than you have lent them, or tell them that, alternatively, they can save up for it and pay only what the item costs.
The chances are they will need to borrow money at some point in their lifetime, so don't drum it into them that all borrowing is bad. Instead, try to encourage them always to find out what the total cost will be if they do need to use credit to buy something.
The content on this page is supplied by MoneySupermarket.com.
Disclaimer: Any content in our family money section is intended as general information only. For specific advice about your personal financial situation, get advice from qualified, independent, regulated professionals.
Last updated: over 1 year ago