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How to teach children about money

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Teach children about money

We all know that children learn from the world around them. And us adults need to lead by example. How your children will manage money matters later in life is influenced by what they see and learn as children. Set your children up for a bright financial future by talking to them about money now. 

Talk about money early on

How can you talk to small children about money? It may still be a fairly abstract concept to them. So how can we make the lessons accessible? This Forbes article suggests that research shows kids have a basic understanding of money concepts by 3 and form some money habits by 7! So it's certainly important to start when they are young. 

Making it fun and turning it into a game can be a way to get money lessons through to young children. And as an added bonus it could well improve their maths skills! Try role-playing buying and selling items while playing shops. You can use coins and show how transactions work. You can also get kids involved in the weekly food shop. Involve them in making a list at home and then looking for the items in the store. If your children can't read yet, you can give them a picture list of some items for them to find in the store. This is a great way to show a child from a young age how we manage a budget by writing a list and sticking to it. 

Teach about saving

We've all heard the adage that money doesn’t grow on trees. Most families have to manage within a set monthly budget and often those with young children find it the hardest time to save with extra costs such as childcare. We all know that when the money runs out, sometimes you need to save to buy what you want. And sometimes you need to borrow money to pay for larger things or if you need a fast solution.

These are important things to teach your children. Although money is not unlimited, there are ways to be prepared for an emergency or plan for things you want. You could teach a child to save up for a wanted toy or game that they want to buy. This is an important life lesson that you can't always have want you want immediately. A bank account for birthday and Christmas money can also show that you don't have to spend money as soon as you get it, and having access to saved money when something you do want comes up is a great buffer to have. Not to mention the benefits of seeing how by saving small amounts can add up over time. 

Open a bank account

Fewer of us are carrying cash and coins in our wallet these days. With apps that allow you to buy your bus ticket and things like Google and Apple pay, there is less need to carry around cash. Your children will grow up in an ever-increasingly digital environment, and they should learn about this as soon as possible. 

By opening a bank account for your child, you can help show your child how you manage money in the grown-up world. A great place to stash birthday and Christmas money, and you could even pay pocket money directly into your child's account. While they are still young, you will often have an account in trust and if you use your own bank, then you may be able to manage the account via your online banking app, which can be helpful to share with your child and update them regularly on how much they have saved. There are child specific accounts with cards you can get that help teach children about money management, such as Go Henry.

Nothing is free – even sweets cost money!

It can be tempting when out and about to give in to the demands of children at the sweet display by the checkout and not have them cause a scene. But deep down we know that we should resist, not just because of the sugar content, but the unnecessary expense. What are we teaching our kids about money management when we give in? 

When it comes to children, clear boundaries often help. Maybe once you've planned your shopping list you can take out the cash you have budgeted for the shopping. Then you can explain to the child that to afford that bar of chocolate, they would have to return something else or their won't be enough money. This method might not be for everyone, but you can teach your child a lot with healthy boundaries. And lead by example, are you guilty of impulse purchases? Remember, if you didn't want or need something when you entered the shop - you should think twice before parting with your cash! 

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk. Representative example: APR 1270% if borrowing £400 for 4 months. Interest rate: 292% p.a. (fixed). Total amount repayable: £665.48 by four instalments of £166.37. Maximum representative APR: 1604% if full loan repaid after 7 days.