Financial skills are essential to adult life, and given the amount of student debt that most people will start with, it is surprising how little time is given to this subject in formal education settings. The amount of personal debt in the UK is testament to how little we know about money and how to manage it. In order to provide your children with the tools they need to lead financially healthy lives, it’s important we teach them the essentials.
The University of Cambridge has released a report that reveals that children’s money habits are formed by the age of seven, so there is no putting it off. As a parent you are the main influence in your child’s financial behaviours so here are some tips to set them off on the path to financial success.
The Importance of Saving and Spending
This is a valuable lesson and one that you can set in stone from as early as 3 years old. Put out two jars, one for saving and one for spending. Discuss a saving goal with your child, but be careful that this is achievable. It’s best to start small. When your child gets any money for doing chores or birthday money, make sure you split it equally between the two jars. The spending jar can be used to buy sweets or stickers whilst the saving jar accumulates towards their saving goal. This will teach them the importance of patience when it comes to saving.
Introductions to Financial Decisions
This can be done easily in the supermarket. Talk to your children about why you have made decisions about the products you have chosen. They can start to appreciate the importance of choosing brands you can afford and keeping within the parameters of your budget. Giving your child £2 to spend on fruit can also help towards this, as you talk about the various prices and quantities, giving them an experience of how you can make money go further.
Introductions to Compounding
At around 11 your child should be ready to move to a savings account where you can introduce them to interest and how compounding can expedite their savings. At this point it is wise to introduce some long term goals, saving for a car, a house, or traveling.