In a world where educating children is undeniably a major investment for parents who want their kids to get ahead, some things can get overlooked.
We’re talking about financial education. For many children, learning about money plays very little part in their lives. Or it happens at a later age when it’s harder to teach good habits. With a multitude of distractions, it can be hard to focus the attention of the modern child on things like money education. And as a busy, time-poor parent how do you go about teaching children about money? We’ve distilled the essentials for you into three key lessons.
1. You can’t have it when you want it
Sometimes we all have to wait for the things we want. Even while children are young it is possible to teach this idea. Instead of thinking of the supermarket as a kind of Disneyland where it’s all there for the taking, your role is to help them understand you’re there for a purpose. Before going in the shop or market it’s a good idea to make them aware why you’re there. “We’re here to buy some food to cook for dinner.” When they see the Lego magazine beaming at them seductively and dissent (as they will) you can gently remind them what you came in for. Learning about money is like learning about anything: it involves repetition. Or in a bookshop you might say, “Today we’re here to buy a gift for Ollie’s birthday. We’re not here to buy for you today.” So you can start to educate your children that going into a shop doesn’t always mean buying. But don’t make things too complicated. For example it’s really good to help your children set goals for things they want to buy . The aspect you want them to grasp is the more universal idea of a goal, moving towards it and then accomplishing it. That’s where tools like goHenry come in useful because they enable you to combine the multiple concepts of earning, saving, and spending, and of course, choice, in one application.
2. Spending money involves making choices
In terms of money education, the idea of choice is a major concept. It’s something that as adults we do (or should hopefully do) automatically and consistently, a daily balancing act. So how do you show your children how this works in their terms. Perhaps you’ve picked them up after school and they want a treat from their favourite café . It’s a delicious but overpriced smoothie and buying two doesn’t leave you much change out of £10. You might want to suggest, “Look if we don’t have the smoothie here, we can buy some cake to take home for after dinner.” They might still opt for the smoothie but they’ll be aware that there is a choice and the idea of now or later is also a good introduction to the realities of life. They’ll still get a treat but they can see there are limits.
3. Your money can grow if you save it
This is the point in financial education where you start to teach your children that just because they have a stash of money, they don’t have to immediately dispose of it. They can actually choose to save some of it and watch it turn into more money. (We’ll ignore current low base Bank of England rates for the moment). We’re not saying it’s an easy task, especially when loving grandparents turn up with cash inside birthday cards saying, “Now you can buy something you really want.” But it can be done and quite possibly without tears. Suggest to your children that when they are given money – be it gifts or payments for chores – the first thing they do is put some away for saving. We’ve found that around 10% is a good number. It enables them to form a savings habit and doesn’t make them feel too deprived in the moment. We also like the idea of a matching plan. No need to go over the top; offer to add £2.50 for every £10 they save.
Did you know?
With a goHenry account, your children learn about money by seeing how their earning and saving relates to their spending. They can set Savings Targets and see their weekly earning, saving and spending in graphical, easy-to-use educational formats.