If you’re thinking about teaching your kids about the importance of investment, the first thing you’ll need to start with is the reason. You could explain to them what happens if they do invest their money, and if they don’t. Showing them your Interactive Investor portfolio can be a way to bring things to life Talk through the pros and cons if they don’t start now. Maybe start with some simple examples of saving money. Get them thinking about how they could try this with their pocket money, if this is something you’ve introduced as a parent.
Encourage them to save from an early age
Start by introducing a piggy bank. Regularly give your children an amount of pocket money. The amount is up to you completely, whether it’s fifty pence or five pounds. This way encourages children to see the value in their pennies and watch how the total value grows over time. After a month or longer, show them that they can now save more, spend or invest it. It’s basic, but they will build an understanding of how investment works.
Talk about incomings and outgoings, together
When they are slightly older perhaps, print out a recent bank statement which can be theirs or yours. Show them how to look for incomings and outgoings. Talk to them about how to spot particular high spendings, if there are any. This could give them the opportunity, age dependent, to start asking any questions about the balance of spending versus saving. It could indicate to them the type (and quantity) of outgoings and bills they might have when they grow up.
Discuss saving for their big life milestones
Get your teenager thinking about life milestones. If they mention University, travelling, or having a house one day, this is a great chance to chat about what the costs are. Try to avoid dampening their dreams, but it is sensible for them to be aware of how money is involved. Together, brainstorm ways they can save for themselves and get them to research investment and saving schemes, as well as grants and loans, that are made for those milestones.
Make the most of Childrens ISAs at Interactive Investor
There are lots of banking and saving schemes that young people can invest in. Help your kids to open their own childrens ISA at Interactive Investror at an early age. They can get used to how to use their money, and spend wisely on special occasions like birthdays. Then, introduce saving schemes, like ISAs (‘Individual savings account’) and LISAs (‘Lifetime individual savings account’). Explain how these work, how they can benefit in the long term, and get them involved.
Understanding their payslip
Help your kids understand how to interpret their payslip when they get their first job. They need to understand the difference between gross and net pay. Knowing how things like tax and national insurance works is really important if they are to get to grips with investment. Talking about this could be likely to bring up important questions they have later about pensions, student debt and tax rates. As they grow up, start conversations about how pensions work, and the benefits.
Teach your kids that money should be earned, saved and invested
If your kids are too young for official employment, there are still little ways of building their knowledge of how money works. For example, ask them to help out with some household chores, and in return, you can give them a small monetary reward. This might help them feel motivated to earn their keep. Then, suggest adding their new wages to their piggy bank. This is one easy way of showing them how their money can grow if they work for it.
Finally, there are lots of ways you can assist your kids when it comes to understanding how money works. It can be complex, and there can be a lot of jargon for them to get their head around, especially as they become older. But try some of these practical suggestions to get you started to help your children grow up wise about monetary investments. When they get older, you can answer their questions about financial plans for their life too.