Personal finance is something that some adults find really complicated and so they feel that it is not something that they can teach their children. Schools in the UK now have some financial education on the curriculum. However, it is unlikely that this will be enough and so it is a good idea to spend some time to teach your children about personal finance. It is likely to be a lot easier than you think as it need not get too complicated.
Set a good example
Children are easily influenced by parents and watch and copy what they do. Even from a very young age they will see what you are doing with regards to spending money and they will start to copy those behaviours. Therefore it is worth thinking about whether you feel that what you are doing is setting a good example for them. Consider whether you are spending beyond your means, buying lots of luxury items, borrowing lots of money or other things that might be setting a bad example to them, also think about good things that you could do such as comparing prices, putting money into a savings account and checking your bank balance.
Many adults have memories as a child of things their parents did with regards to money. It is amazing how much children notice and then remember as adults and so if we can do our best to set a good example there is a chance that they will follow that example and have good financial habits as they get older.
Get them a bank account and money box
Starting children saving young is really worthwhile. There are two purposes to saving which can be beneficial to them. Firstly they realise that they do not have to spend all of the money that they have. Putting some in a savings account for when they need it is really important as there are many people that just spend money because they have it. They feel that it is there to spend and end up buying things that they do not need just because they can afford it. By learning the joy of saving and adding up how much money they have and reaching targets of having different amounts in their bank account they should get into great habits.
Another great use for money boxes and bank accounts is to teach them how to save up for things. It does children a lot of good to feel the pleasure of saving up money and then beng able to afford to buy something. Waiting to get something rather than getting it right away prevents impulse buying habits to form. They will also understand that they can save up and wiat for things and hopefully as adults this will prevent them from borrowing money so that they can get the things that they want right away.
Encourage then to save not spend
Some people like to give children pocket money or money for their birthday so that they can enjoy it and spend it right away. However, if we get into the habit of spending every bit of money that comes our way, we will never learn the joy or importance or saving. It is a shame when children are shown that they have to spend all money and do not get shown how important it is to save.
Another great advantage of them saving form when they are young is that they can build up some money which they can buy useful things with when they are older. Rather than buying sweets, comics and toys, they will be able to put it towards driving lessons, university, interview clothes or a deposit on their first home. These are so much more important than toys and sweets and can make a huge difference to their lives.
Talk to them about money and your household finances
It is a good idea, as they get older to make your children aware of the expenses of running a household. They need to be aware of all of the different things that have to be paid for. It is easy for them to think that heat, light, water, houses and things like that are not items that we pay for because we do not have to go to a shop and buy them. Even with things that are purchased in shops, they may not understand how much things cost and how much of your income is taken up with buying them.
Understanding that there are expenses associated with renting or owning a home is important. If they understand this then they will know that if they want to be independent then they will have to get a job, which could even encourage them to study harder at school. It will just prepare them for what they will have to face and how much they will have to pay out.
Explain differences between necessities and luxuries
It is really important to understand the difference between things that we have to buy and things that we want to buy. Necessities are things that we have to get to survive or are contractually obliged to pay for. This includes food and heat, loan repayments and bills. We also buy a lot of things that are not essential to survive such as holidays, wine, apps, music and books. Although these items bring us a lot of pleasure and really add quality to our lives, they are not necessary to survive and so we should be buying them once we have paid for all of the things that are necessary first.
So as you can see there are a lot of things that parents can do to teach their children good financial habits. Although not all of them are easy, just doing a few can help them to start some good habits which hopefully they will continue when they are older. Teaching children good financial habits can really help to make them happier as they get older as money can be a huge source of stress for a lot of people. Therefore anything that can be done to help should be really appreciated by them.