Talk Money Week – How to teach your children (and grandchildren) about money

This year’s Talk Money Week (4th – 8th November 2014) theme is to ‘Do One Thing’ that could help improve financial wellbeing – by Russell Miles

 
Recent research from Santander showed a worrying number of parents – around two-fifths (42%) – who said they do not feel they know enough about money management themselves to guide their children. While this is concerning in itself, there are small lessons everyone can teach, even without realising, on how to be financially savvy from a young age, which can be fundamental in building financial confidence in the future, As parents and grandparents, we need to take time out of our busy schedules to teach our children the important life skill of managing their money wisely. It’s up to us to show them the way. But where do we start?

1. Help them learn the cost of living

 
Teaching children how money is a finite resource is a valuable lesson to learn. To spend it, you have to earn it, and that means making choices. Set aside a sum of money and ask them to balance the family budget for a month. Tell them how much the utilities cost and then ask them to assign the remaining budget between grocery shops, take-aways, clothes, cinema trips, sports clubs, and saving for a holiday. Allow them to do the online shop so they get used to how much things cost in the real world.

At the end of the month, talk to them about their experiences and what they learned. How much money was left? Could they have spent less, and how?
 

2. Help them learn the value of money

 
Let your children see how many hours it takes to earn a certain amount of money, encourage them to do household chores in exchange for their weekly spending money. Wash the car; mow the lawn; empty the dishwasher; tidy up, dust, and vacuum their room. Show them where they fit and how they can help the family unit. Many families seem to have lost the value of this. This is a vital way of teaching your children responsibility and accountability.

3. Encourage them to save

 
Get them interested in putting a regular amount of money aside. Price-comparison websites can help here as they provide information on the best savings rates for children’s accounts.

Teach them the difference between holding cash on deposit and investing for a better long-term return. But alongside that teach them that returns can be ‘jumpy’ and not to lose faith but to focus on the longer term.

Sometimes a good old-fashioned money box can help children feel the importance of saving and make them responsible and ultimately more grown-up.
 

4. Teach them about money scams

 
Children are now much more tech-savvy, but also more casual about sharing their personal information online. Warn them about the dangers of doing this and let them know that a bank or financial institution would never ask them to divulge their personal information.

5. Invest time in your kids

 
Above all, spend time teaching your children everything you have learnt in life. It doesn’t have to be all at once. But make a list of the things you wished you’d known about at certain stages in your life. Then assess when you think each child is ready for the next lesson. Just try not to leave it until the moment after they needed that advice.

Show them the importance of saving in the short, medium, and long term. Teach them about the merits of pensions and investments. Teach them how to plan their futures. Help them set life goals and discuss the potential amounts of money needed to achieve each stage and how long and how much they will need to save to reach each milestone.
 
Russell Miles is Personal Finance Commentator at Charles Stanley