Good Money Management Starts at Home
For future financial stability it is useful for everyone to learn good money management skills. As essential as learning maths and English, getting a firm grip of the finances, even from a very young age will stand any child in  good stead for when they approach adulthood. Each day we are reminded of painful examples of what happens when individuals let their finances run out of control. The result is nearly always negative and life changing. Never before has there been a greater need and importance for children to learn to adopt and put good money habits into place; to avoid that slippery slope into a downward spiral of debt later in life. When it comes to spending, it seems the elder generation may have had a point. Used to frugal times and living in the remnants of two world wars, life was hard, and money was tight. Items would only be bought if money was available, and luxury items were exactly that – luxuries - only to be bought after endless months of saving. In a similar way, it would be wise to teach our children this same stable money-control system. Children can absorb and develop good money skills in a number of ways...
Teach children the basic value of money
Young children (and adults!) often love money! They love the feel, the colour, the shininess of it and will happy play and count it for hours. Playing simple games such as ‘shops’ from an early age will re-enforce to children where money is spent and how much individual items cost – giving each item an intrinsic value. Buy some fake coins and notes, and play games that involve making money and spending money – for older primary school aged children classic games such as Monopoly and Game of Life are great at teaching this.
Pocket Money
Another superb way to teach children the value of money is to award them with a weekly pocket money allowance. This will feel extra special to them as they will have their own money to do with what they want. They will be able to decide whether they want to spend it all straight away or if they want to save it towards purchasing something special. Explain to your child what the pocket money is generally for, such as small treats. Many youngsters are wise to the fact that by fluttering their eyelashes at their mum or dad at an appropriate moment in a sweet or toy shop they will get an extra treat in addition to their pocket money. If their pocket money is meant for this purpose, you will need to clearly explain they won’t get these top up treats. Also, encourage children to earn extra money by helping with some simple chores around the house. Earning cash this way will help build self-esteem and will link money as a reward for work.
How much pocket money should you give your child?
This of course is variable and should be as much as you can afford. To give you a general picture, according to research carried out by Halifax in 2009, the pocket money average was £6.13 a week for 8 to 15-year-olds.
Teach a simple yet effective way to budget
Buy your children a couple of groovy and fun looking piggy banks that they can drop their coins into. Mark one with the word ‘Spending’, the other with ‘Saving’. Each time they acquire any cash, encourage them to equally apportion the money into the two piggy banks – not just the spending one!
Encourage your child to save up for something ‘big’ such as a new bike or computer game. Enhance this by offering a ‘pound for pound’ system, where you’ll financially match what they save, effectively doubling their savings – offering an exclusive 100% Bank of Mum and Dad interest rate! This will allow them to reach their goal quicker but will still give them responsibility for their savings. They will learn if they want something costly they will have to save for it first.
If they must borrow make sure they pay it back straight away
Steer your child as far away from the borrowing trap as possible. Only lend money to them if they can pay you back straight away. This sounds horribly harsh, but it is better that they learn this from you rather than from an unforgiving bank twenty years later. It will help them learn about what they can and can’t afford and that they can’t always have everything they want straight away.
Savings accounts for small savers
Once that piggy bank marked ‘Saving’ starts to fill up it’s a good idea to open a ‘Young Savers’ account at a local bank. These accounts are aimed at the under 16’s and offer tax-free savings with a competitive rate of interest. It is a good idea for a child to engage in the whole bank experience by visiting the local branch of their bank armed with a bag full of coins, then handing their money over to the bank clerk and then receiving a print out of their bank balance; which they can –hopefully- watch grow in time! This is a good way for children to associate their money with a bank.
Savings for the future
Yes, on that first day at primary school, university seems a long, long way ahead. But before you know it, the years will have passed, and those A levels results will fall through the letterbox, and if university is on the prospective future agenda, it’s well worth making financial plans now. There has been much dissatisfaction about the rise in university tuition fees, but it looks as though those fees are here to stay. Aside from higher education it is always wise to plan ahead for your child’s financial future. At the moment the Child Trust Fund is still available as a way to invest for your child. However, the government intends to reduce and then stop CTF payments in the next few years. From 1st August 2010, the extra payments for seven year olds have stopped and from 3rd August 2010, the £250 CTF payments have been reduced to £50. In addition, parents, family and friends can collectively invest an extra £1,200 to the tax exempt CTF account each year.
Finally - Be a good role model
Fortunately and unfortunately, our children soak up all our habits – good and bad ones! So, lead a good example, take a firm grip on your finances and watch happily as your children follow suit.
Kirsty Woodgate |
