It is important to ensure that our kids have sound money management skills especially now that we are in one of the worst recessions in history. Is this a skill taught at home or in school? My experience is that our children are not exposed to any formal learning and have to face University/Employment with a distinct lack of financial skills. The annual Push Student Debt Survey revealed that youngsters planning to go to University in 2012 could find themselves saddled with a debt of £54,300. It is therefore vital that we invest in our children’s future by developing sound financial skills at various stages of their development. Here are some ideas to help teach your kids about money:
The Earlier years
Early Introduction to the Concept of Money
Introduce your kids to the concept of money through play. Initially they can set up shop using play money and as they develop introduce them to the different denominations of money. Encourage them to purchase their own treats and count out change with your assistance.
Consider a Weekly Allowance
An allowance no matter how small can be an effective learning process. Encourage your kids to divide the allowance between saving and spending. Assist them with goal setting on their savings and empower them to make decisions on what they should spend their allowance on. Don’t forget to praise them as the savings pot grows. This will develop their self-confidence and promote responsible spending habits.
Establish Family Finance Discussions
As your kids grow, discuss the different aspects of money and the family budget. They should understand that effort is required to earn and retain money. Discuss how family income is generated, how the family budget is developed and how you spend it. Explain the difficulty in today’s economy of trying to save money and the importance of being able to put something aside for emergencies or for luxuries. This process will teach them about the value of money within the family unit.
The Teen Years
Record Keeping
At this stage of their development your kids should now have a good grounding in the concept of money. It may be appropriate to introduce them to concept of record keeping. Develop ways for your kids to keep track of their money. If they have a Savings Account they should be encouraged to understand the mechanism of how this works.
It may be that they save in a piggy bank at home. They could be encouraged monthly to record the starting balance, plus how much deposited, less how much spent, and the closing balance at the end of the month.
Financial Institutions
Before leaving school for University/Employment your kids need to understand how financial institutions operate. They need to know how a bank account works and be able to read a bank statement. Explain the concept of interest earned on savings and discuss with them when appropriate the concept of interest paid on borrowings. Also address the issue of credit cards and the need for tight control on spending and regular payments.
