This month child ISA’s have been launched with the chief aim of encouraging parents to save for their children. For those who were fortunate enough to be given a bonus by the government into a Child Trust Fund at their child’s birth, this presents an opportunity to transfer those funds across and potentially get a better interest rate.
Putting aside what we can for our children is a natural instinct; being able to give them that pot of money when they reach 18 is a luxury that can ease the pressure at what can be quite a difficult time for young people. Finally adults, they are free of formal education and ready to make their own choices about the future, be that going to university, getting a job or their own home, amongst other things.
Whilst this emphasis on saving is very worthy, it seems a bit crazy that no one really considers the money skills that these young people are expected to have by the time they reach 18. Do your children know how to spend?
When I grew up things were very different to how they are today which, I believe helped me to develop good money habits. The ‘coffee culture’ that we exist in today (more on that in a minute), simply didn’t exist. We were taught to shop for what we needed and we got the OCCASSIONAL treat. I emphasise that here because what used to be a Saturday morning trip to the sweet shop can be a daily occurrence for many kids. This is what I mean by the coffee culture, if we (me included) sat down and listed all the things we spent our money on in a week I think many of us would be surprised and quite shocked.
I’m not being judgmental here, or suggesting the way we spend money today is wrong – our lifestyles have changed dramatically and trust me I love my Starbucks as much as the next person, however when it comes to teaching children about good money habits they’re not getting the same messages that many of my generation did. I regularly go out with my children and we will pick up a sandwich or sausage roll, an ice cream, a coffee (me). When I was younger we would take a picnic and an ice cream would only happen every so often.
This is why I believe it’s important to focus some energy on teaching children how to spend as well as save, after all the two are intrinsically linked. Ask yourself this; how can we expect a young person to save money if they have no idea about good spending habits?!
It’s important to start speaking to children about money as early as you can. We’re talking about developing good habits, so in the same way you might encourage your child to brush their teeth every evening and morning, start weaving in conversations about money. Also with an increasingly cashless society, it’s important to remind them how much things cost and that money has to be earned (no ATMs don’t just spout free money!)
A few age tips that might be helpful include:
Age 3 to 5
Start with the little ones by showing them what money is, let them handle coins and stack them up, help them to understand that size doesn’t necessarily equate to value. Let them put money into a glass jar so they can see how much money they might need for a sweet versus a favourite toy.
Age 5 – 8
As your child grows they will invariably be spending lots of time with you in shops and often at ATM’s. Make sure you speak to them when you’re withdrawing money and help them to understand that it’s coming from your bank account not being given to you! Let them have a pound and work out what they can get for it in a shop.
Age 9 – 11
At this age you might start to give your child pocket money, this is the first step in teaching children to be responsible for their own money. Letting them make choices and understand that these choices bring consequences, sometimes good, sometimes bad is an important lesson.
Age 12 onwards
As your child matures help them to set goals for things they really want. This process of prioritising and having to sometimes wait and save up to get what you want is important, especially in today’s credit driven world. It also naturally introduces the concept of earning which as a parent you can encourage by asking children to do some jobs around the home in return for a small monetary reward.
Openly discuss what your child wants to save for and work together to come up with a series of goals so they can work towards the things they really want.