This week is Financial Capability week and marks a week of much chatter in the media about financial education and how much we as a nation understand finance, how to manage it and how to not get into financial difficulty. Here are my top tips for helping your children with financial education.
I strongly feel that if we get the financial education right for children then they will enter adult life aware of financial decisions and how to manage their finances correctly. This needs to start from an early age and parents need to lead the way in educating their children.
Back in August I wrote my top tips for financial education for children and I was featured in the Times. I wrote tip for primary aged and secondary school children. Take a read and see what you can do to help your children’s financial future.
Primary aged children – what I do with my three boys
- It is important to understand the value of money. I always explain how much things cost from a pair of football boots to the cost of the mortgage. It puts thing into perspective.
- I am open about how much money we earn as a family and explain how different jobs can earn different amount of money.
- We talk about dreams and aspirations and the importance of goals and a plan to get there. Whether that be an accountant to a plumber to a premiership footballer. They have a dream and a path planned on how to get there.
- They understand a basic budget, including the costs included in living/running a house. It’s a good exercise to get younger children to have a think about what costs money in a household and how much to budget for. Maybe get them to create their own spreadsheet.
- Children must understand the basics of savings and debt. The earlier they realise the better, that it’s always better to save up a chunk of money when you want to buy something big. Every time you get paid you should put a chunk of it into savings.
- Open a children’s savings account with your children and encourage them to watch it grow.
For older children -secondary school age
- Teach understanding of debit cards and credit cards. No teenager should grow up thinking that a credit card is free money. They are thrown at you once you get to university/ aged 18. It is essential to know it’s not free money and that it costs in term of interest and must be paid back.
- Teach them the difference between rent and mortgage. The idea of owning a house one day and creating a path on how to achieve that goal.
- Understand the basics of investment. If you have some money in savings you can invest this to create more value. The concept of a share is the simplest to explain.
- To get a job when they are ready, be that a newspaper round to working in a shop to picking strawberries. The importance of earning your own money rather than the bank of mum and dad is essential and children are more likely to appreciate money if they have earned it themselves.
The most important thing for all children is to be honest and talk about all things financial.