From Tiny Acorns

Teaching children the importance of money management is essential

Research has shown that children pick up their key financial habits by the age of just seven – so it’s never too early to teach them about money.

‘It’s vital that children have an appreciation and understanding of the value of money,’ says Robert Stringer from Stringer Mann Financial Planners in Berkhamsted. ‘Teaching them the concept of delayed gratification can be the key to helping them manage their money for life.’

Young Children

Children as young as three or four can learn some basics.

‘Set up a play shop so they can learn about paying for things,’ suggests Robert. This also teaches them numerical skills.

‘Use non-monetary ways to get them to understand about delayed gratification. For example, if they don’t have the biscuit now, they can have an ice cream later.’

Children of seven and eight recognise the value of money, and understand that money is exchanged for things they want. While they’re also capable of understanding the concept of waiting for something they really want, they struggle with the difference between luxuries and necessities.

‘This is a good age to start talking about household bills,’ says Robert. ‘Get them to understand that if you leave all the lights on, the electricity has to be paid for – which means you might not be able to afford something else, like their football lessons or karate class.

‘Try and include them in planning too, such as setting a weekly budget or writing a shopping list to help build their understanding.’

Pre-teens

Pocket money is a great way to teach them about spending and saving.

‘Consider giving them a small amount each week, and then offer the chance to earn more by doing jobs, such as washing the car or mowing the awn,’ suggests Robert. ‘This will help them see the money as a reward that’s directly related to the work they’ve done.’

To help them understand about saving, give them a jar where they can see the money accumulate, or set up an account that they can access online. Show them that, if they have £10 and spend £7 but save £3 as soon as they’re given it, the money quickly builds up, which gives them the ability to buy something they really want.

‘Encouraging them to reflect on money, and think about what they can buy right now versus what they can save up for later can be a real challenge, but definitely one worth pursuing,’ says Robert.

‘Children also need to understand that swiping a card is still spending it.

‘When our grandparents were young, most people were paid in cash and would put money into tins for mortgage, bills and so on. Most people didn’t – and couldn’t – spend above their means. These days, it’s all too easy to spend what you don’t have.’

Teenagers

It’s essential to emphasise the importance of planning ahead, and the consequences of making the right or wrong decisions about their spending.

‘For example, if they have a certain amount of money for food and transport to and from college, they need to learn that, if they spend it all on a KFC and then can’t get home, that has consequences,’ says Robert.

‘Maybe instead they should look ahead, and plan to take a packed lunch two or three times, so they can afford a treat at the end of the week.’

Teens can also learn the basics about things such as mortgages and loans, but keep it simple.

Grown-ups

It’s never too late to learn about respecting money. We need to ask ourselves, ‘Do I need that more than I need the money?’ before making impulse purchases or that easy one-click Amazon buy.

‘If it helps, work out a weekly budget and take the cash out at the beginning of the week,’ says Robert. ‘You’ll probably find it much harder to hand over a £10 note for your lunch than if you just swipe a card at the till.’

For help with any financial issues, visit Stringer Mann at www.stringermann.co.uk.