The days of physical coupons and squirrelling coins away in a prized piggy bank are disappearing fast, replaced by tap and click transactions on a tablet, phone or smartwatch. Is it therefore surprising that money has become less tangible and meaningful for children? Add to this the cash-less world of Covid-19, this dilemma of educating children about money and spending has only intensified.
New research by HSBC UK has delved into children’s attitudes towards finances. The research found that many may have a steep learning curve ahead of them, when it comes to how they might manage their day-to-day finances as an adult.
In an effort to address this we asked our expert partners for ideas when teaching children to budget and manage their money.
1. Start Young
Most experts believe that vital money skills and habits are formed from the ages of three to seven. Use these early years to your advantage and integrate money conversations and activities into everyday life.
“It’s very much down to older family members to do the teaching. Young children can learn about budgeting by helping with the weekly shop or planning an outing, and about the benefits of saving with their own cash account.”Sharon Bonfield, Propositions Manager, St James’s Place Wealth Management
2. Be Creative
“In a world that often functions without physical notes and coins, you must get creative to make this seemingly unlimited and invisible resource real to your children.”Maya Prabhu, Managing Director, Head of Wealth Advisory at J.P. Morgan Private Bank
Thinking outside the box and coming up with methods that are tangible and visual for children can really help accelerate their understanding. Again, this can start early during pre-school years with piggy bank savings and progress as they earn pocket money in return for chores.
“Encourage the use of jars where they split their money between savings and spending; it’s also a great idea to introduce a third jar for sharing. I used to encourage my son by matching his savings, which made him inclined to save that bit more!”Tracy Browne, Director, Investment Management, Tilney Investment Management Services Ltd
3. Pause before purchase
A brief pause gives you and your child a chance to think about their request and the decision behind it. It allows them to process why they want something and ask themselves other important questions such as; Do I really need this? Would my money be better spent elsewhere?
“Pause before purchase is a practice I enact with my son. Everything is so quick, such an instant gratification, whether it is the amazon click or throwing something in the basket in the grocery store. Often just that cooling-off period is that time to have that richer conversation.”Kelly Hearn, Co-Founder & Psychotherapist, Examined Life
4. Involve children in real-life situations
Next time there’s a big financial decision to be made – and if it’s age-appropriate – let your children in on your thinking and decision-making, showing them how you choose to allocate money, what you lose and what you gain. Children are constantly learning through experience and observation and letting them watch your management techniques is one of the best ways of teaching them.
“Think about day-to-day learning opportunities, make it fun, even simple things like planning a holiday together.”Maya Prabhu, Managing Director, Head of Wealth Advisory at J.P. Morgan Private Bank
5. Understand your own relationship with money
It starts with you, and if money is one of those things that you find difficult to talk about, even with those close to you, it’s essential to explore why you feel this way and find ways to address any issues.
“It’s important to explore your – and your partner’s – relationship with money so you can intentionally build a family financial plan in line with your values.”Kelly Hearn, Co-Founder & Psychotherapist, Examined Life
“Children are learning, observing and absorbing money messages all the time so why not make it intentional and say what messages do we want to give our children, how can we make this a positive conversation?”Maya Prabhu, Managing Director, Head of Wealth Advisory at J.P. Morgan Private Bank