Teaching Your Children About Money
Teaching your children about money will help them develop good habits for the future. Here are a number of helpful tips to help parents show children how to make smart money decisions:
Giving young children pocket money
The relationship between needs and wants is an important concept for children to understand. Teaching a child about managing money at an early age will help them understand the difference between needs and wants and should make future conversations about money easier. Pocket money can be a good way to start. It doesn’t have to be much as long as you have set out the rules in advance as to how much is involved and on what basis it is given for example, is it earned? It is important to remain consistent with these rules. Then discuss with the child how they plan to spend their money.
A great way to help children get started and learn how to budget is to have three jars with the following labels:
- Spending – for buying something straight away
- Savings – for a saving goal – for instance saving for a toy, book or sports jersey. Explain to your child why it is important to save and show them how they can do this by agreeing on a savings goal together. Get them to work out what the cost of the item that they are saving for is and how long it would take to save for it, based on how much pocket money they get
- Future – this is money that is put away and can’t be touched until an agreed time in the future, maybe an annual holiday fund– teaching your child the importance of putting a little away for a special event or a rainy day is a good way for them to be prepared for what might happen in the future.
Every time your child receives money they can decide how much they would like to put into each jar. Over time your child will begin to understand how to manage money and will be ready for the next step, opening their own bank account
Open a savings account
It is a good idea to help your child to open a children’s account. Banks, credit unions and post offices offer children’s accounts and you can open one with as little as €1. Children’s accounts are usually easy to use and don’t have no charges. Once the account is opened, you can encourage your child to lodge money from their savings jars into their account each week.
Reward young children’s money saving efforts
It’s natural that children may lose interest in saving their money or become frustrated when they want to buy something straight away without having enough saved. You could encourage them to continue saving by agreeing to match the amount they have saved for a couple of weeks to help them reach their goal.
Keep it fun
A good way to teach children about making choices is to involve them in some household budgeting decisions. For example, when planning your next family day out give your children the opportunity to be involved in choosing where to go. Try to limit the choice to two or three different places. Give them the total amount you have available to spend and discuss the pros and cons of each, weighing up the cost involved and the importance of prioritising what is most important to them. When on the trip give each child a small amount of money to budget and spend themselves.
Do you have any tips for teaching children about money?