Teaching your children about money is an important part of being a parent. They start to learn about money from an early age, whether you teach them or not. And if you leave it to chance, they could end up getting off to a bad start with money.
So, how can you make sure they learn good money habits at an early age?
In this article, we’ll share five ways to teach your children better money habits.
- Explain wants vs needs
Explain the difference between essential things versus nice-to-haves. This will help them understand the fact that you have to prioritise what you spend your money on, ensuring you keep enough for the necessities of life. Quiz them every so often to check their understanding. After a while, they’ll understand why we need to buy the most important things first.
- Teach them how money works
Give your children a basic understanding of the fundamental money systems that we live with as adults. This will prepare them with the skills they will need to use when they grow up. Teach them about topics such as compound interest, how the banking system works, and methods for building a strong credit history. One day, they’ll look back and be grateful for the early training you gave them.
- Let them earn
Many parents give their children an allowance. Why not use this as an opportunity to teach your kids about earning money? Teaching them about earning drives home the importance of saving and spending money wisely. Assign your children chores and give them a ‘wage’ based on the level of responsibility. This way, they get pocket money and learn valuable lessons at the same time.
- Give them somewhere to save
It’s important your children have a dedicated place where they can keep their money safe. It will be easier for them to learn how to save if they actually have somewhere to practise it. Younger children can just use a piggy bank. If your children are older, you can find them a good children’s savings account. The earlier they start saving, the longer they’ll have to get good at it.
- Set a good example
What are you implicitly teaching your children through your own money habits? The average UK household saved less than 10% of their income in Q4 2022. If your own savings rates are this low, then you should focus on increasing them and trying to set your children a good example. Set up an emergency fund, open up an ISA account, and start contributing towards your pension. It’s natural for children to emulate their parents – so if you want your children to become good savers, start by becoming a better saver yourself.
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