If you don’t teach your children about money then someone else will. The Money Advice Service together with Cambridge University found that money habits are formed by the age of seven! Does your seven year old know the difference between a need and a want? At 16 do they have a good grasp of debt and have their own bank account?
It doesn’t need to be complicated – here are our 17 tips and conversation starters that will teach your kids about money.
By the age of 7…..
Understanding the difference between a ‘need’ and a ‘want’ is a critical part of a budget. At 7 your children should know the difference – it will help them to stay in the black in later life!
- Set an example. Show your kids how it’s done. Don’t live beyond your means. Openly talk about money with your partner (talk means talk – no fighting people!). Your kids are likely to follow the example that you set as they get older.
- Explain that families have to pay for lots of things that we all need like food, electricity, gas and the house. What do they think happens to the things people want when they have to pay for the things they need first?
- Have a walk around your home and get them to point out the needs and the wants.
- Introduce the idea of a budget – paying and saving for needs before we are able to buy or save towards our wants
- Don’t just give pocket money/allowance for the sake of giving it. Draw up a monthly/weekly chores list. Each chore completed gets some form of financial payment. The benefits of this are two-fold. Your kids learn how the world operates by receiving money in exchange for work and they learn essential skills they will need as they grow up and start to manage their own lives and homes.
By the age of 11…..
As children grow older they will invariably encounter more choice in the way they spend their money. Teaching some key budgeting skills will give them a much stronger financial footing.
- Talk about budgets and how they are used to manage your money (you do have one right??, you really, really should). Talk about the budget for running a house or keeping a car on the road. Get them to plan their next birthday party with you by budgeting for food and entertainment costs.
- Try to avoid impulse buys. If they see something they like for more than £15 then encourage them to sleep on it. There will still be an opportunity to purchase whatever it might be tomorrow or the day after. They might find that the urge to buy it at all has disappeared.
- Don’t engage with competition for the latest phone or other trending items. So what if Tallulah has the latest iPhone? Their’s (probably) still works in exactly the same way as the latest one. Teach the power of being content with what they have and avoid comparisons with others. Put into practice the need vs want and if it still comes out as a need then work together to put a budget in place.
By the age of 14…..
As they start to venture online and cash turns into numbers on a screen it’s time to start talking about credit and debt.
- Do your children know what credit and debt is? Talk about the types of debt – mortgages, loans, credit cards, overdrafts etc. What’s the difference between a credit and debit card?
- Explain what interest is and how it makes you end up paying more for the things you buy when you use credit.
By the age of 16…..
By 16 they might have a part-time job and be earning some money in the big wide world. It’s an important time to teach things like tax and National Insurance.
- If your teens have already started earning then go through their payslip with them. Explain the difference between gross salary and take-home pay. This is also the perfect opportunity for them to learn about tax and National Insurance, what it’s for and why its important we pay our share.
- This is also the time to get them set up with a bank account of their own. Many banks do accounts that allow online banking and come with a contactless debit card for this age group.
By the age of 19…..
It might seem like a long way off for a 19-year-old, but learning about retirement and pensions now will put them in a good place for the future.
- The maximum State Pension in the UK for 2019-2020 is £168.60 a week (that’s £8,767.20 a year). Realistically that’s a lot less than your child might hope to retire on. Ask how they would live on that much per year if they didn’t save anything else? The Money Advice Service has a great calculator you could go through with them.
Teaching your kids about money is vital if you want them to grow up with a healthy relationship towards the green stuff. It’s going to take time and it’s not always going to be easy. Parents are the first port of call (as my parents will tell you!) for any financial emergencies.
Giving them sound financial knowledge and awareness will not only be a huge help for them it might just help you by not having as many of those “Daaaaaadddddd – my car has broken down” calls.