With the current economic climate it pays to be savvy with your money and it’s never too soon for children to start learning about saving, managing and making money. While we’re not suggesting that you turn your children into money obsessed people, worried to spend their pocket-money or always on the look out to make more money, it doesn’t hurt to teach them some basics about finances. There are a number of simple ways that you can spark their interest in the matter of money, the best being those that are hands on which they can be directly involved with. Try the following five suggestions to help them understand the workings of money in the real world.
Help your kids open a bank account
Many children receive pocket-money and a good proportion will have a piggy bank in which to save that left over from what they spend it on. While this can be a way to encourage children to save money, a better option still is to help them to open a bank account. You can explain to your children that their savings will grow faster, as the bank will pay them interest on the money that they deposit; they are in effect lending the bank their money and the interest is a “thank you”. Look at the various children’s savings accounts available together and discuss which are offering the best deals in terms of their interest rates. Children might be tempted to pick an account based on the freebies offered, but get them to compare the interest rates of these accounts with others to see whether the freebies are really worth it. The following website can be used as a starting point to help select their account. Once your child is set up with an account encourage them to check the interest rate each month to check that they are still receiving the best rate; if not they can look at moving to a more profitable account.
Going Overseas? Teach them about Currency Exchange
Besides knowing which currency they will be using when abroad, encourage your children to be involved in deciding where to buy your vacation money. Discuss exchange rates with your children and get them to try to find out where you will get the best deal on your holiday money. Travelex provides some useful advice on selecting where to buy your travel money, which you can look through together.
Explain housing finance to your kids
Whether you rent your home or have a mortgage, you can provide your children with basic details of the finances behind either option. While you won’t want your children to know how much it costs for you to live in your home, you can use a tool aimed at landlords to help show your children how they determine the rent they charge to their tenants to ensure a profit. A good example is one provided by ProBuyToLet.
Teach your kids to budget
While this is probably most relevant to older children, particularly those with extra income beyond pocket money and those with college or university on the horizon, younger children can also benefit from some guidance around budgeting. You can get your children to write down how much money they receive each week and all that they spend it on, to help them see how much they have left over; if they wanted to save for something you could ask them how they might be able to cut down on their outgoings. A range of budgeting tools are available online, but a simple version aimed at children is available at PBS.
Get your kids to follow stocks and shares
The stock market is mentioned on the news every day, so help your children to understand what it’s all about. You don’t need to go into great detail, just what stocks are and the basics of buying and selling them. With this in mind provide your children with a fictional amount of money to “invest” in the stock market in shares of their choosing; get them to follow their progress each week, calculating their profit or loss and deciding when they wish to “sell” them. You might like to direct them to the fantasy stock exchange to get a taste of what it is like to invest in the stock market.
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