Educating children about savings and investments is crucial, says the founder nimbl, the mobile finance app for 8 – 18 year olds. Clint Wilson tells Absolutely Education how to teach children about money
Taxation, bills and budgeting are often perceived as boring, mandatory chores that only grown-ups should have to deal with, but why should our children be shielded from the financial transactions that will become an integral part of their adult lives? If young people are to grow into financially competent and confident adults, they must learn about money early on.
September marks five years since schools began teaching young people financial literacy, however research has found that lessons are rarely taking place. The thought of sending children out into a world of consumer credit and contactless payments without any financial education should be a real cause for concern.
When the lessons do take place, they often focus on coins and cash, neglecting the fact that money has gone digital. If financial literacy classes like these take place so infrequently, and continue to focus on physical transactions alone, they risk their pupils being drastically ill-prepared for the cashless society that exists beyond the school gates.
Children must be introduced to seemingly unexciting financial topics like income and expenditure, credit and debit and money management as both academic subjects and real-world skills if they are to see the benefits later in life. This is where we, as parents, come in.
Pocket money matters
Children learn best through hands-on experiences, which is why there are visible benefits to teaching children financial skills at home. Parents are given the opportunity to take an active role in their child’s financial education, whilst young people are encouraged to view money management as more than a purely academic subject.
Allowing children to experience budgeting, saving and spending in a controlled, safe environment fosters the development of positive financial habits and behaviours. Whether they’re given £1 or £10 a week, children need to understand the value of the money they receive and learn how to spend and save it responsibly.
It can also help to adjust the words we use when giving our children money. The phrase ‘allowance’ implies that the money is to be saved, budgeted or spent responsibly, allocated for a specific purpose, whereas ‘pocket money’ implies a treat or a small amount of money intended to be spent. Of course, this alone won’t change behaviour, but it will help reinforce wider lessons.
The realities of spending
Does your child know the average cost of the weekly family shop, the price of their clothes, or the true cost of that trip into town, including the bus and that bag of sweets on the way home? Exposing children to daily, practical uses of money encourages them to get involved with the family’s money management and develop the essential financial literacy skills.
Collecting your old receipts and monthly bank statements, and getting your children to work out how and what money was spent, encourages them to realise the value of the cash they have. This develops their financial awareness by breaking down the realities of their spending, helping cultivate the financial awareness they will need later in life and enabling them to independently assess whether a certain purchase is breaking the bank.
Reaping the rewards
Whether it is a new video game, the latest toy or the hottest fashion item, a child’s dream purchase will be appreciated more if they have independently saved for it. If young people do not get to spend the money they have successfully managed, they will be unable to realise the benefits that come with careful saving and financial planning.
Help your child reach their goal by allowing them to choose the item they really want and, perhaps with a larger item, offering to pay half. Assist them in establishing a spending and saving plan, setting a target and discussing with them the ways in which they can track their progress. Working together to reach a financial goal can help demonstrate the benefits of saving.
Similar strategies can be used to chart your child’s other spending habits. Sitting down to discuss the constructive ways they can spend their money, such as day-to-day spending, saving for the future and donating to charity simulates the effects of taxation, encouraging your child to plan around their regular outgoings.
Helping to develop money management skills at home in these ways can supplement the steps that have been taken by the education system to improve youth financial literacy, encouraging your child to see the value of being financially savvy from a young age.
Further reading: What age should children be given homework?
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