It can be important to teach children about how to be good with money. It is a vital skill that they need to help them in life. They will get limited teaching at school and once they have grasped basics in maths, parents can then start teaching them about money. There are lots of things to teach and lots of ways to do it, but budgeting is probably the first useful lesson to help them with.
Set an Example
It is wise to set an example. Younger children will be very influenced by their parents and if they see you budgeting, they will start to understand how it works and that it is important. However, it is important that you take time to explain to them what you are doing. They will be too young to fully understand household expenses and may not even grasp the importance until they move out into their own home, but you can still give them basic information that could be of use to them.
When you are shopping with the children, it can be good to talk them through the choices that you are making. Show them the different options and the prices and explain your choices. It might be that you are buying the cheapest or that you are buying the best value for money or that you can afford to buy expensive items because you prefer them. They will begin to understand the importance of comparing items and thinking carefully about what they buy.
It can be wise to explain to them how, if you had less money, you would go for the cheaper option, regardless of how nice it was, because you could not afford not to. It might be that you have to do that anyway or that you have been in the situation before where you had to do it and you can tell them about it. They will then start to realise that they will have different choices to make and why they might make certain choices.
As well as choices when shopping, it can be good to explain to them about decisions you make when you get paid. You might pay some money off a loan, put some in a savings account and leave enough to pay your bills, for example. Tell them what you do so that they start to learn about what is a good habit to get into. We all make mistakes though and if you feel like you are making financial mistakes, then it can be a good idea to tell them about it. It is good for others to learn from your mistakes rather than making them themselves.
Get them a Savings Account
It is worth getting your child a savings account as soon as you can. This will enable them to put any money they are given in there and start earning interest. If they are given money as a baby, you will be able to put the money in the account for them, until they are old enough to decide what to do with it. Children’s savings accounts pay good interest compared to adult’s accounts as well. This means that they are likely to get a rate higher than inflation and so the money will not devalue if it does go into a savings account.
Talk Through Options with Them
It is worth always having a chat with them about any money they get and the options that they have for spending it. As they get old enough to make that decision it is wise to explain to them the advantages of saving. When they get some money show them what they can spend it on and what is too expensive. Then explain that if they put money in the savings account they can wait and buy something more expensive. It is always good to explain the advantages of saving up until they are older as well.
Some parents think it is good for children to spend the money that they are given so that they learn the value of money. However, showing them things in shops and the prices can do that without them having to spend money. They will also not really learn this until they have to work. When they start to calculate how many hours they have to work to pay for certain things, then they will learn the value of money. Choosing whether to buy a few sweets or put the money by until they can afford a chocolate bar does not really teach that much. However, that does not mean that you should not talk to them about it.
Discuss Your Experiences
It is a good idea to talk to them about how you manage your money. You may not have a system but you will still make sure that you live within your means or do not overspend too much. No supermarket worker buys a yacht, for example! So even if you think you are not a good role model, you will still have some advice that you will be able to give to them. If you make mistakes or have done in the past, then tell them about your experiences, once they are old enough to understand. There are also books available to help children with understanding about money. There is a free textbook for secondary school aged children which you can look at online and will give them lots of information and you could always work through it with them, so that you can help them to understand the importance of it all.