The importance of passing money skills down to children
All parents want their children to have the best start in life. One way parents can help their children build the foundations to their life skills is by teaching them basic money skills. Teaching your child about money early will help them to develop a positive attitude towards saving, as well as an understanding of what ‘good value for money’ is.
Our recent Protecting Our Families report revealed a growing concern for the future – with over a third (36%) of families worried about the impact of Brexit and Government changes1. With this in mind, it’s now more important than ever to prepare our children for what might be an uncertain future.
We spoke to two pocket-money mobile applications: Will Carmichael, CEO of RoosterMoney, and Louise Hill, co-founder & COO of goHenry – for insights and knowledge into why it’s important to teach our children financial skills.
Why is it important we teach our children financial skills?
Understanding how finances work is an essential life skill, that’ll help contribute towards their future. Hill explains that “when kids grow up, they are going to be spending using a card most of the time.” As a result, “it’s more important than ever to help kids learn how to manage their money responsibly at a younger age – before they can make any expensive mistakes.”
Carmichael echoed this comment, adding that it’s particularly important to get “those basic attitudes towards money early on.” Understanding value, opportunity costs and the importance of saving can be taught earlier than first thought.
“44% of what we do every day is put down to habit, so cement those habits early on and they will stay with your child for life.”
When should we start teaching children about money?
It’s down to parents to decide when to introduce these concepts, but Carmichael suggests “the earlier you start the better! Children have an incredible ability to absorb concepts.”
Both Hill and Carmichael put forward the idea of getting children involved in getting the best value. One way you can start this could be to get them picking out best-value brands while food shopping – as a way of introducing the concept of ‘good value for money’. These small tasks are opportunities to have “a positive conversation about money.” In other words – get children involved as soon as they’re able to understand.
Hill points out that: “Waiting until young people are 16 or 18, and then getting them to manage their own bank account and money, might just be a bit too late to teach them good money habits.”
Positive influences towards their futures
One notable influence that all parents can relate to is when children notice school friends and piers with new items such as toys or clothes. Carmichael says these scenarios provide parents with “an opportunity to talk to kids about what they want, and how they can achieve those goals within their pocket money routine.”
‘Financial Education’ also became part of the national curriculum in 2014, however Carmichael notes that “it's also up to companies operating in financial sectors to help too, but in reality learning about money needs to be done in context.”
To summarise, a combination of: learning at home, at school and with the help of financial companies, children can gain a positive understanding of money - helping them make smarter financial decisions later on in life. Below, our experts have given their top tips on how parents can teach children about money.
How can we teach our children about money?
- Talk openly about money. Carmichael says discussing money “in an open and fun way can create a really healthy attitude amongst the whole family.” He continues explaining that if parents make a mistake, such as receiving a parking ticket or missing a bill, it’s worth talking children through it and discussing the solution.
- Involve them in day-to-day finances. Both Carmichael and Hill suggest to: “Get the kids involved in the budget for the weekly shop, show them the utility bills when they come in and challenge them to find a better deal online. Have fun talking about what you want to save up for, and make a plan to get there.”
- Help them plan and set their own saving goals. As previously mentioned, children may notice when their school piers get a new toy or clothes; this provides opportunities to help the child set their own saving goals based around their pocket money.
- Teach them about modern-day money. Hill explains that “cash pocket money just doesn’t work for families anymore. Kids want to download music – and they need to get to grips with the concept that although no money passes hands, these downloads still have a cost.” It’s important that children understand the “non-physical concept of money as soon as possible.”
- Reward positive financial decisions. Providing children with incentives to make positive financial decisions, such as saving pocket money instead of spending it straight away, they’ll develop practical money habits that’ll benefit them later in life. “This doesn’t need to be complicated or even expensive, it can start with a basic ‘gold star’ reward system at the age of 4 before progressing onto money itself,” suggests Carmichael.
Ensuring your child has the best start in life is a priority for any parent, but it’s preparing them for those unexpected challenges that’ll drive success when it comes to their finances. Carmichael explains how: “Life isn’t linear, there are lots of ups and downs, and it’s teaching your child how to deal with those challenges that will give them confidence with their cash.” Putting some time aside each week with your child to help them understand these concepts, using our top tips on teaching, may help them avoid any financial downfalls later on.
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