Money makes the world go round, which means it’s never too early to start teaching your children how to manage it wisely. In fact, according to Parents magazine, two or three years old is an ideal time to start because your kids love to play shop – and what do you need to do that, money.
As they have fun buying and selling, you can begin teaching them money skills. What other ways, though, can you teach your children the value of money?
Invest In A Piggy Bank
Every child should have a piggy bank, a place where they can start saving up even before they have anything to save up for. Children love dropping coins into the piggy bank and should be encouraged to do so whenever they can, even if it’s just pennies.
Anything they get for birthdays or Christmas should go into the piggy bank and, every so often, you should empty it, so your children can see how much they are saving. This helps them understand what saving money is. Plus, counting the cash teaches them to recognise coins and notes by sight.
Open A Bank Account
Once the piggy bank is full, take your children to the bank to open a savings account with their savings. This will get them used to the idea of saving money longer-term and with the concept of banks.
Junior ISAs are a great savings option as they offer tax-free interest, meaning more bang for their buck. However, you can’t withdraw money from this account, so it is worth opening a regular savings account as well. Then, as your children get older, you can teach them about managing an account by letting them add and withdraw money based on what they are saving for.
Pay Them An Allowance
Rather than giving your child money as and when they want to buy something, pay them an allowance and have them buy things from that. Link the allowance to jobs around the house, making their bed, for example, or setting the table when they are old enough. This way, your child will start connecting the idea of money with work and understand it has to be earned.
When they get their allowance, encourage your children to not only save up for what they want to buy but save for the long-term, depositing half their money into their bank account.
Set A Savings Plan
Once your children are earning an allowance, get them to start thinking about how they might want to spend it. At first, they will probably want to spend their money on sweets and toys but, as they get older, they will probably want bigger things. When this happens, sit with them and work out how much they will need and how long it will take them to save enough money.
Use visuals to help your children see how close to their savings goal they are. Examples of this are a thermometer or a tree with a leaf for every pound they need to save.
Let Them Spend Their Money Their Way
What your children do with their allowance should be up to them. Resist the urge to tell them how to spend it or stop them buying what they want (as long as they can afford it). If they make a mistake on a shopping trip and spend all their money only to see then something else they want to buy, they are more likely to learn a lesson than if you told them not to spend the money.
If your children have been saving up for something big, avoid the temptation to buy the item for them on your credit card. Instead, let them pay cash so they can make the connection between the money they have and the goods they buy.
Talk To Your Children About Your Money Decisions
Finally, while you don’t necessarily want to open up to your two-year-old about your financial situation, as your children get older let them know how and why you make the decisions you do when it comes to your finances.
When they are younger, this might be saying you’re picking one item over another during your weekly shop because that one item is cheaper. As they get older, explain what you spend your money on and why helping set them up well for managing their finances.