As parents, we want to give our children every advantage in life. From ensuring they have the best education to helping them navigate the complexities of growing up, we strive to prepare them for a bright future. But one area that often gets overlooked is financial education.
Teaching your children how to manage money can set them on a path to financial independence and success. It’s not just about avoiding debt or saving for a rainy day. It’s about equipping them with the tools to make good decisions that will shape their future.
5 Top Tips
As someone who’s spent years advising people on financial matters and sharing insights on BBC Radio Kent, I’m passionate about helping families prepare the next generation to manage money wisely. Here are my top 5 tips on how to start teaching your children the basics of personal finance:
1. Start Early: Make money management a life skill
Just as you teach your children to read or ride a bike, teaching them about money should start early. The earlier they learn the basics of budgeting, saving, and delayed gratification, the better prepared they’ll be for the financial challenges of adulthood.
A great way to start is with pocket money. Give your children a small amount of money regularly and encourage them to decide how to use it. This could involve saving up for a larger purchase, spending on something they want, or even donating to a cause they care about.
The key is to let them make their own decisions, and their own mistakes. If they spend all their pocket money at once and can’t afford something later, it’s a valuable lesson about planning and priorities.
2. Introduce the concept of saving
Children are naturally impatient. Teaching them to save for something they really want can be a game-changer. Whether it’s a toy, a game, or a special day out, help them set a goal and track their progress. You can even incentivise saving by offering to match what they put aside, reinforcing the value of long-term planning.
3. Make financial tools easy to understand
When we talk about money, it’s easy to fall into jargon (interest rates, pensions, mortgages) but even young children can grasp these concepts if they’re explained in simple terms.
For example, you could explain the concept of interest by showing them how their savings can grow over time. Or, when they’re a little older, talk about borrowing and repayment by comparing it to borrowing a toy from a friend and the responsibility of returning it in good condition.
The more familiar they are with these ideas early on, the more confident they’ll be when faced with real-world financial decisions later.
4. Encourage responsibility with pocket money
Giving your child responsibility over their own money is one of the best ways to teach financial skills. Let them manage their pocket money, decide how to spend or save it, and even learn from the occasional poor decision.
The lessons learned from managing a small allowance will lay the foundation for bigger decisions as they grow older. Like managing a budget, saving for a home, or planning for retirement.
5. Lead by example
Your children are always watching. If they see you budgeting, saving, and making thoughtful financial decisions, they’ll be more likely to follow suit. Share your thought process with them when making every day financial decisions, like comparing prices at the supermarket or saving for a family holiday.
These everyday moments are powerful teaching opportunities that can have a lasting impact.
The long-term benefits
Financial literacy isn’t just a life skill; it’s a life changer. By starting these conversations early and reinforcing them over time, you can help your children avoid common pitfalls like unnecessary debt, poor saving habits, or financial stress.
As they grow, they’ll not only have the confidence to make sound financial decisions but also the resilience to navigate unexpected challenges.
Help for grown ups
At Citrus Financial, we’re here to support families across the Sevenoaks area. Whether you’re planning for your child’s future or looking to build your own financial security, we can help.
At Citrus Financial, we’re here to support families across the Sevenoaks area. Whether you’re planning for your child’s future or looking to build your own financial security, we can help.
Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 21/11/2024
About the author: David is a highly regarded financial expert, known to many as BBC Radio Kent’s “Money Mentor,” where he shares practical advice and insights on managing money effectively. As the founder of Citrus Financial, David has built a reputation for providing tailored financial guidance to individuals and families, helping them achieve their financial goals with confidence.
You can hear more of David on BBC Sounds.
