August 27th, 2021

3 important lessons to teach your children about money

Learning how to manage money effectively is an important life skill, and the bedrock of sensible financial planning. Despite this, many young people aren’t being taught how. According to the National Student Money Survey, around 7 in 10 people surveyed wished they had received better financial education when they were young.

If you want to help to teach your children about money, here are three important lessons for them to learn.

1. The importance of saving

One of the most important financial lessons that you can teach your children is why it’s important to save and how to do so effectively. This is one of the best ways to instil good financial habits in them from an early age.

Setting up a junior savings account on behalf of your child can be a good start. You may want to get them to help pick an account, which can be a good opportunity to explain aspects of saving, such as what an interest rate is.

Once you’ve set up the account, you may want to talk to them about how much of their pocket money they would like to save and how much they can spend.

While piggy banks have traditionally been the best way to teach kids about saving, in the digital age, you might want to try something a bit more sophisticated.

When your children are old enough to have their own phone, you may want to introduce them to apps such as RoosterMoney, which can help them to learn more about managing their money. This handy app allows you to set saving goals and list chores for them to earn some extra pocket money.

Furthermore, it also offers a debit card with parental controls, which can be helpful for safely introducing them to the concept of spending money with a card.

2. How to budget effectively

Another useful lesson to teach your children is how to budget, as this is an important life skill.

As you may know, children need a lot of energy to grow and so they are never full, especially teenagers. This is why food can be an easy way to teach lessons about learning to budget.

One of the easiest ways to do this is to make a snack list for your weekly shop and letting your child choose which foods they want within the budget. This is also a good opportunity to encourage healthy eating by setting a lower price for healthy snacks, so your kids don’t fill up on junk food.

As they get a bit older, you can also get them more involved with your weekly shopping and meal planning. Not only can this be a good way to cement their understanding of budgeting, but it also helps to improve their cooking skills.

This is particularly important if they ever plan to become a student, to make sure they’re eating nutritious meals when they’re old enough to live by themselves.

3. How credit works

When your children grow a bit older, you may want to start teaching them more complicated lessons about finance. One of the most important ones you can teach them is how overdrafts and credit work, as it can help to prevent them from making expensive mistakes.

If children aren’t properly taught about these things, when the time comes for them to leave home and start managing their own finances, they can run into an obvious pitfall. If they don’t know better, it can be easy to regard their overdrafts as essentially free money.

Of course, this isn’t the case and the interest on any money they owe to their bank can quickly add up, potentially resulting in a hefty bill. This is why it’s important to teach them that they should only rely on their overdraft as a last resort.

Furthermore, it can also be important to teach them how to use credit effectively. As you probably know, credit can be very useful when making large purchases, but it can also have downsides too.

While the most obvious one is the risk of going deep into debt, there is also the risk of missing payments if they rely on credit too heavily. This can damage their credit score and make it difficult to make large purchases later in life – such as when they apply for a mortgage.

That’s why sitting down with your children and explaining these important points of how credit works can be useful for making sure they don’t make any costly mistakes.

Get in touch

If you’d like to top up your financial knowledge, we can help. Email enquiries@prosserknowles.co.uk or click here to request a call back from one of our advisers.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

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