Why It’s Important to Teach Children about Money
By Erik Bohjort
Money. It’s a topic that some of us find difficult to talk about, especially when it comes to discussing personal finances. However, it’s important we are not silent about this topic as studies show that children are likely to grasp money management skills best when they are having fun practicing with their parents.
Luckily, there are lots of easy ways to get your child started on learning the basics of financial literacy, as well as equipping them with the essential skills such as how to earn, how to save, and most importantly, how to spend responsibly.
Start Talking About Money
Openly communicating with your children about money will encourage them to develop a healthy relationship with it.
Consider involving your children in a real-life family budget discussion, allowing them to hear about the impacts that earning, saving, and spending will have on your finances.
For starters, have a transparent discussion about the budget you’ve set for a particular family activity that you want to do, and what it means for you to have to save up for it. For example, are you saving up for a family holiday? Will you have to cut down on treats such as eating out in the weeks approaching it?
Be clear about the costs and benefits of this saving endeavor. This helps your children understand how small savings add up to significant goals.
Introduce Regular Pocket Money
Pocket money is another great way to help your child develop financial literacy. Pocket money lets children be responsible for managing their own money, in a safe environment. It teaches children the essential principles of spending and saving, and the trade-offs between the two.
Consider introducing real money to your children from the age of 5 years, starting with a weekly pocket money to get them used to receiving money regularly. Then consider transitioning over to a monthly allowance at around 11 so that they learn how to stretch their budget, as they will have to later in life.
Spend Some and Save Some
Our brains are hardwired to be inherently impulsive. So, encouraging your children to save some of their money for their dream purchases is an excellent way to teach them how to control their impulsivity, and be more sensible in their spending. Gradually, they will start to understand the difference between ‘want’ and ‘need’, which helps to set a precedent for long-term financial wellbeing.
Maximise your Child’s Earning Potential
Setting rewards for chores is an effective way to teach children where money comes from, and that you have to earn it.
Give your child optional chores that they can complete to earn some additional money. For example, perhaps if they empty the dishwasher, they could get 10p on top of their regular allowance.
Encourage your children to suggest chores too. This is a great way to inspire them to think about their own earning potential. It works even better if they have a savings goal – such as ‘save up for a scooter’ – so that they can see how earning money moves them closer to their goal.
Lose the Paper Chores Charts
Previously, you might have taught your kids how to manage money using chores charts stuck on the fridge and a physical piggy bank, but with cash disappearing from everyday life, it is important that kids learn how to handle digital money from the get-go. Consider using technology to simplify your pocket money and chores management. For example, rather than just handing over weekly pocket money, empower your children to learn the principles of financial literacy by saving, earning, and spending through a free pocket money app or online like Go Henry, where you can have sight of your child’s progress and discuss it as a family.
Remember, the earlier you introduce money management skills to your child, the easier and more naturally they will grasp principles that will set them up to be responsible with money in their adult lives.
Erik Bohjort is a child psychologist and Head of Research at Gimi (www.gimitheapp.com), a free pocket money app and chores manager. With thanks to Families Magazine for the contribution, this article was originally published in their print magazine. You can read the latest article here
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