We recently asked our members, “What advice would you give to your younger self?” where one of our members, Anna, said, “I should have taught my younger self to learn how to keep track of my finances. This is a good start for saving effectively.”
Learning to be responsible with money is a valuable life lesson to have. If children are taught good money habits from a young age, they are likely to stay with them.
Studies have found that nearly half of the parents that were surveyed claimed that they missed out on the opportunity to talk to their children about money and finances
On the other hand, children are always eager for their parents to share their wisdom. From the same survey, half of the children would have liked their parents to teach them about money.
If you want to play a key role in creating a better picture of money for your children, you need to give them the gift of financial literacy from a young age.
Here are some tips on how.
Go back to the basics at an early age
When your child is old enough, introduce coins and notes to them. Explain to them what each coin and note is and its value. For example, you can show them how many 10 pence can make £1. You should also show them how money works. Let them see you make purchases with cash.
If you must use a debit or credit card, explain that you are using money to buy something. After you have made your purchase, show the children your receipt so that they how much you paid. Do this over and over again so that it becomes a habit. As they get older, they will understand how money works.
Introduce the habit of saving
Initially, you would have taught children how to spend money. It’s important that you also show them how to save money.
By learning how to save is not only an essential money habit but it will also teach children how to set goals, plan, being prepared, being disciplined and also brings about security and independence.
You can help children get into the habit of saving by opening a Junior Savings Account or simply giving them a piggy bank where they can deposit any coins and cash that they receive. Give them some money mantras such as:
• I love saving money
• Saving is a great habit
• Saving money makes me feel good and it helps me build my future.
Get ways of earning money
Children need to have their own money so that they learn how to make decisions about using it.
For example, give them certain chores that they can get paid for.
When they are older, you can show them other ways that they can earn money. For example, babysitting, dog walking, making items and then selling them, and perhaps teaching others something that they are good for a small fee. For instance, if they are good at dancing, they can show younger children how to dance.
Teach them how to budget
By showing children how to budget, will help them learn how to make smart spending decisions.
They will be able to track how much is coming in and what is going out. They will also know how much they are saving.
You can either use pen and paper or tools such as the budgeting tool on the MoneySkills app.
This will also teach that if they want to buy something, they have to wait and save to buy it. This helps them understand that “money doesn’t grow on trees!” and that you will buy something for them whenever you go to the shops.
Teach them how to shop
Take them to the shops and show them how the same type of item has different prices and to be savvy and buy the more cost-effective one. For example, a bag of pasta costs £1.50 and is 500gm is more expensive as opposed to one that is 80 pence that is 500gm. Also, how one can get refill packs of such as detergents or fabric softeners as opposed to buying the whole bottle again. Refill packs can be cheaper.
You can also show how they can make use of special offers as well as bulk buying if you use the item daily.
Make a pretend shop using the empty cartons and bottles of items used in the household. Teach how to “buy” these things. Make pretend money in the countries denomination to show how to give and receive change.
Show them how to avoid an impulse purchase – tell them to take a second and think what other uses the item which they want to purchase has. They need to think of at least three or more other uses to be able to justify the purchase. Or if not uses, how long will the item stay relevant i.e. not have a seasonal item. This way they will understand that they shouldn’t buy an item just because it looks ‘pretty’ but because they will actually use it.
Teach your children to be resourceful
Show them how they can:
1. Upcycle – for example: show them how can they make a pencil holder from cans and decorate with leftover or used wrapping paper; a pot for growing a flower from a plastic bottle or paper cartons; cartons or large boxes to make a playhouse or den; old clothes to make bags or pillowcases.
2. Recycle and reuse – For example, grocery bags to make bin liners; used newspaper to protect surfaces when doing art projects how food containers can be washed properly to store other food or left-over food; using glass bottle with good caps to store juice or consumable liquids.
3. DIY – for example, homemade costumes using items that you have around the house for fancy dress parties; create homemade greeting cards rather than buying them; in the kitchen, show them how they can make their own juice or smoothie, sandwiches, pizza, popcorn. Tell them how much ready-made items cost and how many more you can make when you buy the ingredients to make your own.
Also, if something breaks, and can be mended, show them how they can fix it to increase its life. For example, if an item of clothing tears, show them how they can fix the hole with a needle and thread.
4. Enjoy activities that cost little or no money. For example, going to a free museum, go on a picnic, read a book, play outdoors when it’s sunny, to name but a few.
5. Reheat or make use of leftover food to create a new dish for example make pasta bake from leftover sauce and pasta, sprinkle cheese and bake, stir-fried rice.
6. Stretch an item so that it lasts longer. For example, if a wiping cloth is large, you can cut it up and make two or more pieces. This shows them how one purchase can go a long way.
Sharing is caring
Introduce the concept of sharing whether it’s with their siblings or their friends so that they don’t all have to buy the same item, especially if it’s expensive.
You can also tell them that they can give their items, which they have finished using, to someone else so that that they can use them. For example, if they have grown out a coat, they can give it to their younger sibling.
Still on sharing, encourage them to use some of their money, which they earned, to help others. For example, you can give it towards a charity of your choice; awareness days such as Comic Relief or fundraising events where the organisers are trying to raise funds for a good cause. This is a good opportunity for you to talk to them about donations.
Be a good role model
Children observe their grown-ups and adapt to what they see. Therefore, show your children that you good money habits. This includes setting a budget, making a shopping list (and sticking to it), using discounts and managing your money wisely which have a positive impact on savings.