Money is far from the most important thing in the world, but our lives are certainly more difficult when we don’t have enough.
Recent reports say levels of debt are at an all-time high, specifically the amount owed on loans and credit cards. Many young people find themselves saddled with student loans that can take years to pay off, eating into rewards from the careers they work hard to build.
By making sure they are money-wise at a young age, we can help our children develop skills and attitudes to money that will serve them well throughout their lives.
Age 5 and under
- Show them the difference between different banknotes and coins. For young kids, size matters – they’ll choose a 10p piece over a 20p, or a nickel (five cents) instead of a dime (ten cents). Let them examine your coins – make sure they don’t put them in their mouths – and talk about the different values. Ask them to identify the different ones – ‘Which one is 50p?’ or ‘Which note is worth ten dollars?’
- Play ‘shop’. Kids love this game. Save empty packets and boxes from food and household goods, make pretend money out of paper – or buy toy versions if you prefer. This is a great way for kids to learn the basics of commerce, as well as developing their imaginations through role-play.
- Clip coupons. If you have money-off vouchers, explain what they are for. Give them to your child and ask them to look out for the relevant products when you go shopping. You can also point out any in-store offers, such as ‘three for the price of two’. Afterwards, look at your receipt with them and work out how much money you’ve saved by choosing the special offers.
Age 10 and under
- Introduce them to the concept of saving. Most children of this age receive a small allowance or pocket money, often in exchange for helping with household chores; if not, perhaps they receive money as gifts for Christmas and birthdays. Explain that for every pound, dollar or unit of your local currency they manage to save each month, you will double it (or give them an additional amount that works for you). They will find watching their cash increase over time exciting and be motivated to carry on.
- Help them open their own bank account. Many banks offer special accounts for children with benefits such as higher interest rates, free gifts or discounts at popular attractions. Use the experience as a learning opportunity, comparing the rates or rewards from several different banks and discussing which would be the best option. They will also enjoy the grown-up feeling of lining up to see the cashier with their own paying-in book.
- Car-boot and table-top sales are popular in the UK, as are yard-sales in the US. This is a good way to pass on unwanted clothes, toys and possessions and make extra money, sometimes for charity. There’s no reason why your child can’t be in charge, making decisions such as how much to charge for different items and agreeing on the discounts you’ll allow when haggling with customers.
- When they’re older, there’s no reason why your child shouldn’t learn how to manage a household budget. Sit down with them to discuss how much money comes into the home and how much goes out on essential costs such as utility bills. Talk about what’s left and how ‘disposable income’ works. If they had to make cuts, what would they do – give up a premium satellite television package or spend less on food bills? What would influence their choice? If you don’t want to disclose your true income, use percentages.
- Work with them to apply what they’ve learned to their own ‘budget’. How much of their allowance will they spend on magazines, cosmetics or treats? What about making sure they can top up their mobile phone credit or putting some aside for savings? Talk about the difference between ‘wants’ and ‘needs’. You can also introduce the idea of paying interest – if they run out of money and ask to borrow, explain that if it takes them more than two weeks to pay it back, you will add on a percentage to what they owe you. More than a month, you’ll add on a higher percentage.
- Teach them how to compare prices in the shops. If an item comes in different sizes according to brand, how would they work out which is cheaper? Look at the difference between own-label and branded products, and discuss how a difference in quality also plays a part in your choice. Which do they think would be the most economical?