Teaching Children about Money

Teaching children about money can be a valuable lesson. It can lead to them spending and saving money responsibly as adults. But how can parents help teach their children about this subject?

One way is to start to save on children’s behalf. Opening some sort of children’s savings account , such as a Junior ISA, is a good way of doing this. The JISA has recently replaced the Child Trust Fund, and one of the things the Labour government stated as a reason for introducing the Child Trust Fund scheme was that it could help children understand the value of saving. It could be said that the Junior ISA also has this benefit. If parents are making regular savings on behalf of their children and children see the value increasing over time then they can see how it will benefit them. The money is increasing the more their parents save. They will also be able to see that investing money increases the overall pot over time. Once they receive this money themselves they will really see the benefits. They will see how their parent’s saving for all this time has meant they have a pot of money for driving lessons, a car, a deposit on a home, or whatever they wish to spend it on. This will hopefully encourage them to save where possible once they are adults. When investing for children, involving them in the process may be a wise idea. Discussing the options, and even letting them contribute to decisions, will make them more involved and, therefore, more aware.

Simply making children aware of money, budgeting and general finance can teach them a lot. Seeing how money works in a variety of ways will educate them and could increase their financial responsibility once they become adults. Parents can involve them in the budgeting so they better understand that budgeting is often necessary and money cannot just be spent without considering the consequences.

As well as learning about how money works, learning about the value of things is also important. Children sometimes wonder why their parents cannot just buy them every toy they want, and teaching them about how much goes towards the essentials such rent or a mortgage, food and bills, can make them better understand why this isn’t possible and how little can be left at the end of a month. Understanding the price differences between different things can also be valuable.

What about understanding the value of work? This is obviously important for all children before they go out into the real world. One way of teaching them this is to pay them to do the household chores instead of just giving them pocket money. They can then see the value of working; they do the work, get paid for it, and then have the money to spend on something they want. Giving them the option of doing extra chores for a little extra money can also be a good lesson, as this is akin to working extra for a higher pay packet in the real world.

If children really want something, for example a new toy or game, explaining to them that they can have it once they save enough of their pocket money can teach them the value of saving. They see that if they commit to saving over a period of time then they will eventually see the rewards.

Parents will have differing views of how to teach their children about money and at which age to do so. While it may not be the best idea to make it seem as though money is all that matters, teaching children about how money works – the value of saving and the importance of budgeting – is a valuable lesson.

Andrew Marshall ©