You teach your children to cross the road, ride a bike and even give them advice about their choice of partner; but one of the most important parts of their lives is often ignored by parents. Teaching your children about money should be a fundamental part of their growing up because understanding how to handle money when they reach maturity will help them avoid debt and the problems associated with it. The knowledge will also help them do what they want and live a productive life.
The Basics of Money from the Age of Five
Your five year old might not want money advice or to know about interest rates and dividends, but they should be learning about the saving process. Kids always want things and although it feels like you are being a good parent by providing everything you can, you would be a better parent if you can teach your children the value of the things they want. Start with a piggy bank where they can place some coins in every few days and let them understand how the real world works from a young age.
Many of the things very young children want are like impulse buys, but after spending thirty minutes watching their TV channels you soon see the cartoons are interspersed with lots of advertisements for toys and games. Use these to motivate your child to save and ask them to sacrifice an occasional impulse buy to place the money in the piggy bank. This actually works well if you are trying to look after your child's health too because skipping sweets will help you avoid taking them to the dentist or doctors as often as you would if you succumbed to every request.
The Growing Child or Young Adult
As your child matures, they should have bank accounts and be able to save for large purchases in much the same way as an adult does. Teaching your child to bank is important because their lives will revolve around a relationship with a bank when they are old enough to work. People who have been with a bank for a long time are more likely to receive credit from a bank if they need it when they start work. It's incredibly hard to get a loan (say for a first car) when you are very young, even with a history of saving.
Teaching Growing Children Responsibility
Banks like HSBC will give children a debit card from the age of 11 with the parent's permission and that will help build a level of trust. Most banks are not â€˜relationship lenders', which means they use scoring systems to say whether someone can have a loan; but that doesn't mean your child won't get a better score if they have a history with the bank.
I'm not suggesting you train your child so they are able to get credit when they grow up - in fact, I'm saying just the opposite because I'm telling you to teach your kids to save. People all need credit at some point otherwise; first time buyers will be living with parents' right up to their forties until they can afford to buy a home outright.
Teaching Children to Invest
You don't have to encourage children to gamble on the stock market, but encouraging children to entrepreneurial is very desirable. As your children grow older, they grow out of some toys and they might prefer to sell some of their old favourites in order to buy something they want. Teaching them how to sell on eBay and GumTree or Craigslist can lead to them buying and selling and possibly turning some of their savings into a little profit. All the things talked about here will equip your child to be the best they possibly can with money and that is a responsibility for every parent.
Abel Froman is a blog-farther to three young boys who are growing rapidly and he tries to offer money advice wherever he can. He might not teach them to hunt, but he will teach them how to provide.