Good money habits are formed early in life. So, why not give your kids a head-start with their financial futures and teach them a thing or two about money management? There’s a host of games and apps available to lend a hand, so they won’t even realise they’re learning. Here’s a few ideas to get you started…
1. Show them that money doesn’t grow on trees
When kids see cash popping out of the wall and parents paying for shopping with the wave of a seemingly magic plastic card, it’s no wonder they think money is an unlimited resource. You could start by simply explaining the basics, like where money comes from and how it gets to the bank, perhaps using toys, or LEGO® to make it fun. (LEGO is just one of the companies we've written about in our 'Companies that do good' feature). You could also look at an app like PiggyBot that uses play to teach younger kids how to plan their spending and saving, and to pick savings goals and stick to them. If your kids are older, why not simply make a list of your own household income and outgoings to show them where all the money goes and how much everything, like heating, electricity and food really costs?
2. Teach them money management
One of the most effective ways to teach kids about managing money is to hand them some responsibility. Work out a weekly allowance to cover the cost of any regular activities, lunch money, and a bit extra for pocket money then agree a spending plan. This should help them understand that blowing their entire budget on the latest Avengers toy means they can’t afford something else they want – an important life lesson. An emergency cash fund is also important for healthy finances, so why not encourage them to save a proportion of their allowance in a rainy-day fund. Apps like the Aardman-designed Pigby’s Fair uses an animated fairground adventure to help 4-6-year olds understand the ‘spend or save’ dilemma. Older kids might enjoy a board game like Payday, which encourages good planning, budgeting and saving habits, and even rewards players for having an emergency fund and long-term investing habits. At the very least it’ll get them off the iPad for an hour.
3. Give them money confidence
Kids love pretending to be adults and thanks to smart apps like GoHenry, 6-18-year olds can experience the excitement, kudos and freedom of owning their very own contactless debit card to make purchases online and in shops, or withdraw cash from ATMs. It’s a pre-paid card with a host of parental controls, so there’s no danger of expensive mistakes. Adults can set up regular, or make one-off, payments, block the card if it goes missing and even get notifications every time it’s used, all via an app. Kids get to customise their card and earn extra credit by completing tasks, like chores. The grown-up feeling they’ll get with their very own card should teach them to act and think responsibly about their spending by the time they leave for university!
4. Teach them that saving is cool!
With credit being so common, it’s easy to forget the sense of achievement you feel when you finally get your hands on the thing you’ve saved so hard for. Teaching this to your children could be a rewarding experience for everyone. So, next time they say ‘I want…’ sit them down and agree a savings plan, working out how much of their pocket money they need to save, and for how long to reach it. Completed chores and good behaviour could earn them extra cash to reach their goal quicker. When they’ve saved enough, make an occasion of going to the shop and let them pay the cashier. They’ll remember the feeling of accomplishment they got, and with any luck they’ll catch the savings bug for life.
5. Introduce them to investing
It’s never too early or too late to learn something new, so why not teach the kids (and maybe yourself) a little bit about investing? The earlier you start investing the more chance your money gets to grow, so teaching the kids now could give them an advantage when they’re old enough to invest themselves. Discussing the advantages (the potential for better returns than from cash savings and the power of compound returns) and the disadvantages (risk and fees), will help them to make an informed choice. You could even help get them started on their own investment journey. Why not start a small investment Plan on behalf of each child, then check in periodically to see how their investments are performing? The experience should prove to be both fun and educational. What’s more, they can top it up with birthday, Christmas or pocket money and by the time they reach university age, they should have a lump sum to help along the way, as well as both good savings habits and an appreciation of the power of long-term investing.
Please remember that investments can go down in value, and you could get back less than invested.
Investing is for everyone.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.