With news of rising debts hitting the headlines recently and increasing numbers of people struggling to keep up with repayments, there might be greater calls to stress the importance of learning money management skills… and the younger, the better.
Learning how to handle money is a life skill that will prove valuable for any individual in any circumstance. Whether it is for keeping your shopping within budget, living within your means, saving for that bigger purchase or buying a house, the importance of knowing how to spend, save and manage your money is vital.
Kids are naturally curious and full of questions, so being open and honest about money is the best way forward when it comes to discussing the pounds and the pennies with children. Explaining to them the magical effects of compound interest on savings and how they can earn even more interest on the interest their savings already earn is as important as addressing the problems that might occur through poor money management, such as the impact of having a poor credit rating. Just Mortgage Brokers have created this handy tool which helps to illustrate just how much a poor credit rating costs you. However, talking about this subject does not need to be at all boring.
Introducing money management to younger children with short concentration spans can be done through play without them even realising.
Role play is a good way of introducing the concept of money and paying for things to very young children. For example, pricing up a selection of toys and setting up a shop for them to purchase from helps them to work out how much they have to spend and whether they can afford it.
From here you can introduce the concept of saving vs spending. If they buy ‘x’ now, they will spend a certain amount. However, if they did not buy it now but chose to save the money instead, they can later purchase something of greater value further on down the line.
In addition to these tried and tested methods of introducing money to children, we now have the benefit of the wide variety of websites and services available through the internet. Online banking allows them to see their balance increasing and some services encourage them to save and reach ‘goals’ or ‘targets’, which is absolutely perfect if your child has a competitive streak!
I have a Stocks and Shares ISA with online access which proves very valuable in explaining the concept of investing, profit and loss to the children, who find the visual images of money up vs money down easy to understand rather than when simply chatting about it.
And then there is always a good old game of Monopoly! This is a fabulously fun way of teaching children about buying and selling property, and teaching them that the better you manage your money, the better it will work for you! Of course, do watch that sleight of hand that the odd player might be prone to… or perhaps that is just something only we need to watch for on our family game nights!