Unfortunately, schools do not really do enough to teach kids about money – at least they didn’t when I was growing up! Every parent has their own way dealing with the subject of money with their children and these are just a few tips that you could consider.
- Start by talking it!
Unfortunately many people don’t talk about money because they don’t know how to or feel that the subject is somehow taboo. The best way for children to understand the way money works is to involve them in conversations about money and the sooner the better. Kids should understand where money comes from and that you need to be careful about what you do with it.
- Save in a clear jar
Piggy banks are cute and seem like a part of every childhood but saving in a jar or a bottle helps children to watch their small deposits grow and become more conscious of the effect of taking anything out. My sisters and I each had an empty 5 litre bottle of whiskey (which my dad got from the local pub – no, he didn’t drink it all himself!) and it became a competition to see who could fill theirs the quickest with small change. I don’t remember who won but it was quite satisfying every few months to empty the jar out and arrange the pennies into piles to count how much was there.
- Show them that things cost money
Show them the prices of things when you’re in the supermarket. Show them how much the food costs and compare it to the toy they want and ask which one is more important to have. It’s also good to involve them at the checkout to hand over the money and receive the change. Again, when we were young, my sisters and I would load the shopping onto the belt and guess how much it would come to. This kind of game builds an awareness of how much things cost and also develops mathematical skills.
- Explain opportunity cost
You can’t have everything. If your child has €10 to spend then they can only spend it once. They need to understand that buying one thing means not being able to buy something else and they should make their own choice.
- Lead by example
All parents are hypocrits to some extent. For example, we encourage healthy eating and espouse the virtue of not saying anything unkind about other people but how many of us can honestly claim not to be guilty of those sins! The same goes for money, if you’re trying to teach your kids the value of working and earning what you have and not to make frivolous purchases just because you want something immediately then you need to live by those rules too.
- Give them commissions, not free money
Making kids work to earn money can be a divisive subject. Some kids actually embrace the opportunity to line their little pockets for doing relatively easy tasks. I remember staying with my friend and his son was always asking what he could do for me for to give him some money ‘if I make you a cup of tea, will you give me 50p?’ This probably sounds better than me asking him to make me a cup of tea in exchange for 50p! It can be a divisive subject but I see no harm and getting your kids to do odd jobs like washing the car for a small financial reward. Just don’t step over the line into bribing the them to do the things they should be doing anyway – like keeping their bedroom tidy! The point is to teach them how life works.
- Stress the importance of being generous
One of the pleasures of having money is being able to use it make life better for others whether this means a nice present for a friend or a donation to a charity. Again, it’s an opportunity to educate them about the unfairness of the real world and the importance of helping people less fortunate. Involve them by talking about causes they care about such as the environment or animal rights and then discuss ways to do some fundraising or make a regular donation.
- Teach them to save get them to understand the effect of compounded growth
If you give your kids pocket money then make sure that they are conscious of how they allocate it and don’t just spend it all as soon as they get it. A minimum of 10% should be saved in a jar or their own junior savings account. You could even agree a rate of interest with them. For example, let’s say you sit down with your child and agree to give them €10 a week pocket money. Tell them that if they need to commit to saving 10% each month and if they do then at the end of each month you’ll add 5% to whatever they’ve saved (a very generous rate of interest indeed for the purpose of getting the lesson across – obviously in the real world the benefit of compound interest takes a lot longer!). So, at the end of the first month they’ll have saved €4 and you’ll 20c to it. At the end of the second month, they’ll have €8.20 and you’ll add 5% of this which is 41c and so on. They’ll soon see the benefit of sticking to their commitment to saving and not dipping into the account for purchases. I’d only recommend running this exercise for a limited time otherwise it could end up costing you quite a bit!
- Don’t say ‘we can’t afford it’
In fact, don’t ever say that you can’t do anything but instead ask “how?” If your child asks for something then rather than dismissing it by saying “forget it, we can’t afford it” try saying “that costs €x – what do you think we could do to be able to afford it?” Suddenly, their minds will be focused on work, entrepreneurial endeavours or making cutbacks elsewhere to make what they want a possibility. It will also make them consider whether they value what they have asked for enough to put in the work or make the sacrifices necessary. This is a lesson from Robert Kiyosaki’s book – Rich Dad, Poor Dad which is full of wisdom for creating wealth in life. If you want to save for your children’s future then we can solutions. Get in touch below for a free initial consultation.