Teaching your children good financial habits
5 May 2023
Top tips from financial expert Paul Merriman.
As parents, we want to ensure that our kids are well-prepared to face the challenges of adulthood. One of the most crucial skills that we can teach our children is basic money management. Financial literacy is an important life skill and it should be considered as equally important as reading and writing.
The earlier we start teaching our children about money, the more likely they are to develop good money habits that will stay with them throughout their lives.
Here are some money management tips that you can use to help your kids create good money habits:
Start the process as soon as they can count!
There’s no perfect time to start teaching your child about money however them being able to count is probably the best place to kick things off. Before then, there’s no harm in surrounding them in an environment that discusses finances openly – be it the electricity bill, taking them grocery shopping or setting aside time each week/month to plan the household expenses.
Speak openly about any financial concerns, if you hide the problems, your children might think that there’s something to be concerned about or ashamed of.
Think about bringing your kids shopping, whether it’s the weekly food shop or the quarterly shop for clothes and shoes, explain your budget and your shopping list.
A good starting point during the weekly food shop is to give each child a euro and tell them they can buy what they want for that euro, this will get them thinking about their options and basic budgeting. While this won’t be for everyone, it can instill a strong financial learning environment for your kids.
Set small goals
It’s that age old habit many of us have developed over the years – having a goal and saving up for it. It’s just as important to pass this on to your kids to get them in the habit of saving for important things. Start small, working towards a weekly treat, be it a packet of Pokemon cards, building up the goals to toys and holiday spending money.
Helping them to visualise their savings, consider giving them a money box, so they can watch and see their savings build up. Then move to a physical savings account which will build a sense of accomplishment each week/month.
Teach them about budgeting
Help your kids understand the importance of budgeting and how to create a budget. You can do this by giving them a weekly allowance and asking them to allocate their money for different expenses such as toys, books, or treats.
Encourage them to save for a rainy day
Setting financial goals is important but so is having a rainy day fund or an overall savings pot. The savings fund doesn’t need to be working towards anything in particular, more so to get your children into the habit of saving.
Encourage them to save a portion of their allowance and make it fun by offering a matching contribution or a prize for them when they reach a certain amount.
Teach them to differentiate between needs and wants
Teach your kids the difference between what they need and what they want – something us adults do still struggle do grasp on a regular basis. This is a worthwhile exercise that can help your kids to make better spending decisions and avoid unnecessary expenses.
Teach them how to earn money
Encourage your kids to earn money by doing chores around the house, babysitting or pet sitting. This can teach them the value of hard work and earning money.
Teach them to be responsible
Teach your kids to be responsible by showing them how to pay bills and save for long-term goals such as college. This will help them develop a sense of financial responsibility.
Teaching kids about money management can be a fun and engaging process. You can use games, books, and apps to make the learning process more enjoyable.
Tips for making kids management fun:
- Play money games: Board games like Monopoly Junior or Life can help kids learn about budgeting, saving and investing in a fun way.
- Set them up with their own account and debit card: there’s no better way to teach them about money management than to give them their own debit card (monitored under your watchful eye), so they can set savings goals and track their progress. An Post Money Mate has an app with all of the above features for your child to learn about finances, and the parent or guardian also has an overview of the account.
- Read money-related books: Reading books about money management can help kids understand the value of money and how to manage it. An examples of good money book for kids is "The Berenstain Bears' Trouble with Money".