Soaring energy bills, spiralling food prices and rising interest rates are squeezing budgets in the lead-up to Christmas. But rather than trying to shield our children from the financial difficulties we’re facing, it’s important to talk to them about what’s going on.
It might feel like a daunting topic, but the current crisis can also be a useful opportunity to start conversations with children about handling money and help them gain essential personal finance skills that will set them in good stead for the future.
Here are 6 ways to teach children good money habits:
1. Set up a pocket money app
Giving children pocket money for completing household tasks like tidying their rooms, doing the washing up or setting the table not only helps you out, it also helps them to learn about the value of money and what it takes to earn it.
Pocket money apps like GoHenry, Starling Kite or NatWest RoosterMoney let you (or your child) tick off tasks as you go to earn a set amount. Setting up regular payments for work done gets children thinking about the key pillars of good money management – earning, saving, spending and giving.
For older children, pocket money apps can be accompanied by a debit card so they can get safe practice with using their card in shops and to withdraw cash. You can keep an eye by setting up instant notifications whenever they use the card and setting weekly spending limits.
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2. Involve them in investing
Opening a Junior ISA for your child/ren is a great way to save for their future, tax-free – and also teach them about the power of investing, both for themselves and for a better world.
Sustainable investing platform (and Good With Money ‘Good Egg’ firm) The Big Exchange – co-founded by The Big Issue – enables you to invest in specific themes. So if your child is passionate about climate change, wildlife, or homelessness, for example, they can help to tackle these issues while watching their money grow over time.
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3. Be a good role model
Children learn money habits from what they see their parents doing, so try to set an example with your own finances. You can teach your child the true cost of purchases by involving them in small day-to-day financial decisions. Get them to check a receipt after your shop, look for hidden charges online or put small change into a jar or piggy bank.
Taking your child shopping is a great way to teach them about budgeting. Tell them how much you have to spend and ask them to keep a running total of the items you buy. You could explain why you might choose alternative brands or items than your usuals if they allow you to save money.
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4. Boost their entrepreneurial spirit
If you’re struggling with finding extra cash to give your child pocket money, you could encourage them to earn some spending money for themselves. Older children could come up with interesting ways to earn extra cash like offering to wash a neighbour’s car or sweep their garden path. Or they could sell some old clothes or toys in an online marketplace like eBay, Preloved, or Vinted. Talk to them about how to manage what they earn – ie. set a percentage to save before they get spending.
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5. Get them involved in the household bills
With utility bills increasing, now is the perfect time to show children how household bills are calculated. Smart meters are a good way to show children how small actions around the home can make a real impact on your energy usage and monthly bill.
Experiment with turning the TV and games consoles off of standby mode, turning lights off and reducing the thermostat to see how the numbers move. This will help you save money in the long run and make your children aware of the impact of their decisions.
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6. Most importantly, make it fun!
Games with a financial twist can be a lot of fun while teaching young children about budgeting and spending. Money Match Cafe, Game of Life, Monopoly and Cashflow are good Christmas presents that can teach your child money skills while having family fun. Let them make mistakes and learn from them.
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