Many of us are guilty of shying away from our personal finances. According to a recent survey 83% of parents recognise the value of teaching their children about money, but one in six don’t feel confident enough to approach the subject. While these stats demonstrate that it can be difficult to talk to kids about money, it’s really important. In fact, it’s best to teach kids about money as soon as they learn to count. Recent research from University of Cambridge revealed that children’s financial habits are formed from the age of seven.
When it comes to instilling good habits it’s important to get an early start and understanding how money works ensures that your children will be capable of handling their money rather than allowing their money to handle them. Your behaviour – whether it’s positive or negative – is also likely to influence their financial decisions when they’re grown up.
So what’s the best way to go about it? Be honest and educate young children about spending habits, to create a sense of financial teamwork and differentiate between needs and wants. Baby Budgeting has teamed up with Shane Clifford, Co-Founder and CEO of household bill management app, WonderBill, who is on hand with his top tips on how to establish healthy financial habits in children.
Be a role model – During the early years, children pick up habits and behaviours from their parents and other significant adults in their lives. One way to teach children is to lead by example; good personal finance begins at home. Parents should empower themselves to effectively manage their family’s finances by setting a budget, shopping sensibly and using bill management apps such as WonderBill. This will make a positive impression on their children by showing them that personal finance management doesn’t have to be stressful or a chore.
Make money real – The modern world’s currency of flashy, plastic credit cards combined with online shopping can confuse the value of money in a child’s mind. It’s important to show notes and coins to children to make the idea of money real and clarify the question ‘where does money come from’. Take some time out to explain that money doesn’t grow on trees, is earned and comes out of a personal bank account – whether it be in store, online or from an ATM.
Get saving — Open a savings account under your child’s name and encourage them to contribute a small amount each week. The impact of long-term saving will be obvious when you show them a statement after a few months! Alternatively, stick to a more ‘traditional’ route by using a piggy bank – this delayed gratification is a great thing to instil in children. It’ll guide them away from impulse spending and help them develop their long-term planning skills.
Making an allowance last – Instead of weekly pocket money, consider giving your child a monthly allowance to teach them how to budget. You could also set up a rewards system to encourage your child to earn money doing tasks like washing the dishes or the car. This will teach them the value of money they’ve worked for. When it comes to spending, make it a point to help them differentiate between their wants and needs because this will help them learn to prioritise. It’ll make them think twice before buying something cheaper they may get bored of in a short time versus saving up for that shiny new bike.
Make a plan — It is really valuable to teach children about planning in advance. Let them write a wish list and once they’ve saved up enough, help them shop around before making a final decision. Scout around various online shops, compare prices and help look for the best bargains. After all, clever shopping is almost like a game! If done with enough guidance initially, it’s likely your child will pick this up as a lifelong habit.
Lead by example – Involve your child in the weekly supermarket run and guide them through the shopping list. Give them a total budget and advise them on how to shop cleverly. Taking advantage of things like multi-buy offers and checking the price per KG on pasta or rice can make a good visual impact. When they’re a bit older, why not give them the shopping list and let them take charge, with your support in the background of course!
Keep them in the loop — Children are observant, so don’t leave them in the dark when it comes to your household bills. Let them know that having a house costs money and how paying bills works. It will make them more aware of those everyday household costs, how turning up the heating makes energy bills increase and more baths make the water bill higher. You can explain that the more money you spend on bills, the less you can spend on fun – that’ll bring the point home!
WonderBill is a new household bill management app, available to download from the App Store and Google Play. The app allows users to manage energy, water, multimedia (TV/Netflix etc), broadband and mobile bills, all in one place. A user provides their household bill information once, and then WonderBill does the hard work for them – users see a snapshot of household bill outgoings in an easy-to-use dashboard, plus the best deals tailored to their needs (based on household bill usage and offers available) helping them to save money.