Children need to be taught, from an early age, how to manage money. In fact, it is never too young for you to start this process. Studies show that most children’s spending habits are fully formed by around the age of eight. Here are some tried and tested ways to teach your children what they need to know.
Open a saving account for them
Opening a savings account for each child is a good starting point. There are several types available. You can find out about junior ISAs from this website and use the web to check out other types.
When your child is old enough, you can tell them about their savings account and get them involved in managing that account. Perhaps letting them keep track of what is going on. This is an effective way to demonstrate to them how fast savings can mount up, particularly when you are getting a good rate of interest.
Teach them to count from an early age
The first thing you need to do is to teach your children their numbers and how to count. Even very young children understand that a pile of 6 tokens is bigger than a stack of just 2.
Give them some pocket money
As soon as they are old enough to understand what money is and safely handle it, give them a small allowance. It only has to be enough for them to be able to buy a comic or a few sweets. Then take them to the shops to spend it. This simple act enables them to understand that they need money to be able to get the things that you want.
Let them save up for small purchases
If they want something a little different that costs more than their allowance, agree. But, explain to them that they need to save up for it. Before you do, think about how long they will have to wait before they can afford their special purchase. With very young children, it is usually best to only agree to let them buy things that it will only take a week, maybe two, to save up for. If they have to wait any longer than that, they will become too impatient and having to save up for something will turn into a negative experience for them.
Use savings graphics to encourage them to carry on saving
When they are a bit older, allow them to save up for longer to buy larger items. To encourage and keep your child engaged, consider using a visual aid. For example, an empty thermometer or jar diagram that can be marked with savings targets and coloured in as they reach each milestone. You can find some downloadable ones here.
Encourage them by matching their savings
If you can afford to do so, offer to match your child’s savings efforts. Usually, a 10% match is more than enough to provide a little extra encouragement. If they have saved up £100, giving them a further £10 is affordable, but will still make a significant impact on your child when they receive it.
