Teaching your Kids to be Smarter With Money
As a parent, you’ll know how difficult it is to see a child feeling unwell – or upset when they fall and graze a knee or bump an elbow.
Generally, we do a good job of helping our kids to avoid danger – but do we do enough to help them avoid the stresses and anxieties of money worries as they grow up?
At the moment, UK personal debt levels are growing. At the end of September 2018, each UK adult owed an extra £870 compared to a year before – bringing average debt levels up to £30,819. This debt increase coincides with our own study – showing that 86% of our customers said debt has impacted their mental health.
So, the question is – what can we do to help our kids avoid getting into problem debt and help them to keep on top of their mental well-being?
1 – Starting Early
If you’re the parent of a toddler, you may well think that it’s too early for them to start learning about money. Interestingly though, lessons about finances don’t have to begin with an understanding of money.
Child psychologists often suggest there’s a benefit to be had in helping children to ‘delay gratification’ – i.e. making them wait for things they enjoy – or not just allow free access to the sweets, biscuits or other treats.
Although it’s only a small step, those of us with large credit card bills often wish that the ability to say no to that impulse purchase was a little more deeply ingrained in our behaviour!
2 – Handling money
Money is becoming more and abstract. While we understand that quickly flashing a piece of plastic or a mobile phone over a card reader means money leaves our account – children often don’t – and it’s surprising to discover quite how many children don’t think you need to pay with ‘real money’ in a shop.
The answer is fairly simple – get kids used to handling money and, importantly, handing it over when they want something.
It’s obvious to adults, but getting children to understand that they need to give money to receive a product is another building block toward creating an adult who doesn’t just scan a credit card
3 – Making saving normal
For many adults, saving is a luxury. In fact, in many parts of the UK, 50% of people simply do not have any money saved in case of an emergency or an unexpected large bill.
In reality, saving – whether that’s for luxuries or for necessities – is a habit that it’s essential to be in. A healthy household budget should consider saving as one of the outgoings – along with the gas, electric, council tax, and other bills. When saving is a normal part of life, we’re good at it – even if it’s just a small amount every month.
Instilling this habit early is a great idea for kids. If possible, enforcing some saving of pocket money is useful – as too is on-going discussion around what your child is saving for.
It’s very rare for a child to have the foresight to want to save their money when they’re young – so saving it for/with them then rewarding them with a larger purchase or experience shows how positive it can be. When they’ve got their saving reward, it’s a good time to ask “What would you like to save for next?”
Saving charts will keep the idea from becoming boring too – as will a picture of the planned purchase at the top of the chart!
4 – What costs money?
Becoming an adult comes with some stark revelations for a lot of youngsters; clothes and bathrooms don’t clean themselves, there’s no washing up fairy – and, unfortunately for us all; virtually everything costs money.
As children get older, it’s useful for them to understand what everything costs. Actual sums of money may be a step too far for younger kids – after all, £100 would feel like a lottery win if you’re 10 – but talking about the things that cost helps to build a realistic picture of finances.
You might want to talk about:
- Rent or mortgage payments to live in your home
- The cost of electricity, gas, water and other things that ‘magically’ appear
- The price of food when you go shopping or have days out
- How much clothes and other life essentials cost
- Fuel costs for a car – or bus and train ticket prices
5 – Digital money
Although we’ve talked here a lot about making money ‘real’ – whether we like it or not, children are growing into a world where money is increasingly ‘digital’ – often just a number on our banking app or at the cash machine.
If we’re all honest, this is a part of personal finances that catches a lot of us out – as you’ll know if you’ve ever said: “I thought I had more than that” when you’ve done a balance check.
Helping children to understand that this figure is also ‘real’ money is a great idea. You might want to show them how that figures goes down after you’ve been to the supermarket – or use some plastic coins and notes to show what that balance looks like – and how it reduces each time you take the debit card out of your purse or wallet.
It can be difficult to overcome the gap between ‘real’ and ‘digital’ money – so being firm with mobile phone top-ups and things like money spent on in-game transactions can help youngsters appreciate that even digital money runs out.
6 – Planning a budget
When your child is a little older, allowing them the freedom (and occasional pain!) of safely managing their own money can really drive home the importance of thinking ahead.
Handing out a fixed amount on a Monday for a week of spending will probably make a teenager’s eyes light up – and it can be difficult to say no to more if it somehow disappears by Wednesday – but it’s a great illustration of what life is like when you’re in charge of money.
Suggesting a plan for what’s going to be spent in the week or the month is worth doing – and you can even show your kids how you plan for you money too.
The most important lesson
Learning isn’t just about listening to what you’re told – more often than not, it’s about trial and error, copying what’s seen and behaving in a way that’s like the people we’re around the most. This puts a huge emphasis on you and how you handle money when you have children.
Do the big treats and luxury items go on the credit card in your house – only to cause stress later? Are you one of the hundreds of thousands of families who just put the post in the drawer and ignore phone calls from debt collection agencies?
You’re most certainly not alone if you do – and debt is nothing to be ashamed of – but it’s worth thinking about how you can in control of your finances if you’ve got children, after all, no amount of practicing and pocket money planning will over-ride how your kids see you managing your own money – even if you think you’re hiding the financial stresses and strains well.
If you find yourself struggling with debts, give one of our friendly advisers a call on 0808 2234 102 to discuss what options are available to you.