Worried your kids think money grows on trees? Confused about giving pocket money? Here’s how to teach your children financial sense…
Set an example
Research has shown that parents have the greatest influence on their children’s financial habits, above work experience and financial education in secondary school. So, if they see you impulse-buying, overspending at Christmas and – when they are older and start to understand the concept of banking – wasting money on overdraft and interest charges, what lessons are you teaching them?
Don’t feel guilty for not having a bottomless purse. Calmly explain why the answer is “no” – whether it’s because you can’t afford it or because you bought them something the previous week. This helps your child understand the decision. But be firm and don’t get into a haggling match!
Pocket money can be a minefield. How much to give, when to start, should you give “subs”…? Although pocket money levels vary depending on region and the child’s age, the overall average weekly rate is £6.25 (up from £5.89 in 2010).
But how much you give depends entirely on what you can afford and think is fair. Ask around other parents – but don’t feel obliged to match the amount. Keep these points in mind to help guide you:
- Don’t give too much. Let them save for the things they really want.
- Pay on the same day each week or month. And don’t top up.
- Link pocket money to jobs around the house. Have a basic rate and then add a bonus for small tasks. As they get older, increase the amount they receive. This rewards hard work and stresses the importance of helping out at home.
- Let them spend their money how they want – they need to learn to manage their budget.
Very young children
It’s never too soon to start…
- Get them to make choices i.e. “You can have a comic OR a bar of chocolate”, rather than giving in to both.
- Encourage traditional money games like “playing shop” using pretend coins and notes.
- To avoid supermarket shopping tantrums, bring books, toys or snacks to keep them occupied.
Peer pressure rules – though it’s not impossible to build young financial skills…
- Involve them in the whole process of opening – or switching – savings accounts. Those who start the habit early tend to continue saving as adults. Look out for special deals with smaller, local building societies.
- A piggy bank or empty bottle is still a good way for children to actually watch their coppers grow.
- Give incentives to save up for something special: for instance, for every £10 they save, offer to add £2.
- Games like Monopoly get kids used to budgeting, negotiating and handling money.
- Encourage them to contribute to present-buying, for Father’s Day, for instance, rather than assuming they can always rely on Mum.
- Check out Pocket Money Petz for fun ways to teach them money skills.
Budgeting skills are essential for teenagers – particularly school-leavers.
- Switch from weekly to monthly pocket money so they learn to make it last.
- Decide on the necessities you’ll purchase and the extras they need to buy themselves. For big items, suggest you’ll pay half if they save the rest.
- Budgeting for a “pay-as-you-go” mobile phone is a practical way to learn money management skills.
- Don’t rush to bail them out if they get into problems – they need to learn from their mistakes.
- Encourage – and help – them to shop around to get the best deal whenever possible.