“Money doesn’t grow on trees, you know!” is often the main piece of financial advice parents gave in a child's earliest years. But learning how to manage money is an important life lesson, and it’s not something that’s widely covered in the primary school curriculum. That’s led to some pretty bizarre misconceptions about the cost of living, according to some research from Halifax. It found that most boys and girls aged between eight and 15 believe a loaf of bread costs £15 and a pint of milk £17!
Every child is an individual, and they all mature at different ages, but here are five tips to help start your little one off when you think they are ready to start learning about money at home.
1. Getting hands on
Debit and credit can be a tricky concept, so start with ‘real’ money. Let them get hands on with your notes and coins. Let them hold them and play with them. Show them the values of the different coins and notes.
2. How it works
Let them watch you spend your money. Explain that you have to exchange it for things you want. They can even hand over the money to the shopkeeper themselves, or put it in the self-service checkout, and collect the change.
3. The value of money
Show them the prices of the products on the shelves when you’re shopping and explain how they equate to the value of the notes and coins. Explain how things have different prices. A pint of milk costs less than a pair of shoes, for example. Get them to guess the prices of different products.
4. Being responsible
Give them a few coins of their own as a reward for good behaviour and a piggy bank or money box to keep it in. Explain that they must keep their money safe and secure. Children love responsibility and having their own money like mummy and daddy – it helps them to feel grown up.
5. Starting spending
Young children don’t tend to be terribly materialistic, but if there’s something they enjoy, whether its food, drink, a book or a toy, you can let them buy it with their own money. This helps them think about how they’re going to use money, and learn that when they’ve spent it, it’s gone for good.
As children get older, it’s a parent’s responsibility to help them understand more complex concepts, as in today’s modern world, people use money very differently. It’s predicted that this year debit cards will overtake cash as the most popular way to pay for things in the UK1, for example. This can also present an opportunity to hand more responsibility to your growing children.
Cards for Kids
Increasingly, parents are using pre-paid debit cards to pay their child’s allowance, which are now available for children as young as eight. Some of the more popular cards include goHenry, Osper and nimbl.
The appeal is easy to understand. You can pay their pocket money digitally with a few taps on your phone’s banking app, set spending limits for your child and monitor what they are spending their money on, and it helps them learn about banking, saving and budgeting.
Your child gets a degree of independence, but you retain ultimate control.
The cards come with an app that your child can use to manage their money, so they can watch their savings grow and learn the basics of budgeting – they can’t go overdrawn, so once their money is gone, it’s gone.
The cards can be used in shops, online and for cash withdrawals, and you can even set up alerts so you are notified whenever they make a transaction.
Lessons for life
It’s a great next step to them having their first bank account, but beware, most cards come with charges.
There’s usually a monthly or annual fee, and some also charge for cash withdrawals, so shop around to get the best value.
As a parent, the lessons you teach your children about money can stay with them for life. Helping them understand and respect money from an early age can help them become confident, responsible adults. Keep an eye out for the next blog in this series for some top tips on supporting your children through their teenage years - and when they finally fly the nest.