Teach Your Children About Family Finances

Financial literacy has been part of the national curriculum in English schools since 2014. However, this curriculum is not compulsory in academies, private schools and faith schools, so some children may be missing out. A recent OECD report found that the UK is below average when it comes to teaching the subject.

It isn’t just in this country. A study by the National Endowment for Financial Education in the US revealed that around 24% of millennials demonstrated basic financial literacy and, worryingly, 69% of respondents considered themselves highly knowledgeable about financial matters. This is a reflection of the lack of early exposure to good financial practices.

Teach Your Children About Family Finances

Discussions about financial matters could potentially be difficult but, it is important for children to understand how money works. This will help to prevent them from forming bad habits and making financial mistakes in the future. Equipping them with informed financial decisions and experience financial responsibility is something we, as parents, definitely need to consider.

As a family, it is important to share open and honest conversations about finances. We regularly include Grace in our discussions to help her to develop good money habits. Here are a couple of financial topics to take into account if you are planning to teach your children how to manage their money.

How Earning Works

Give them some idea of how money is made. On the whole, children do not understand how hard you have to work to make money. Talk about different ways to earn money like employment or owning a business and how a college degree will help them earn more money for the same work. Give them scenarios about how much money different professions and levels of education make.

Spending Wisely/Allowance

The best way possible to open your children’s eyes to the finances is by letting them handle it. Let them manage their own allowance. That way any bad decisions will result in them getting short of cash. Help them by letting them experience the consequences first hand.

Also, help them to realise that the quality and usefulness of items you purchase reflect the value of money you spend. If you choose to purchase quality clothes, you are spending money wisely, because you won’t need to replace them as often.

The Difference Between Need and Want

A good indicator for a financially wise person is the ability to differentiate wants and needs. Being able to distinguish the difference is vital. Your decision to spend money highly depends on your distinction between the two. Remember that needs are more important than wants. You can buy your wants but only after you paid for your needs.

Budgeting

Teach children proper budgeting by creating a list of things to spend and placing an amount next to the item. That way, you will be reminded on the range of prices you are able to pay to for a particular item. Budgeting requires critical thinking because allocating between your needs can be a challenge but it is important to manage funds wisely.

Saving

Teach your children that saving is a game changer. Start small using a piggy bank as somewhere your child can place their allowance. If they plan on making a big purchase, use a bank account until they have saved enough. This is a good time to discuss when it’s the right time to take money from savings. For instance, if they the toy they want is £5 and the amount in their bank is £5, it is not the right time to purchase it just because they have the amount needed. Teach them to wait until their savings are up to £10 to withdraw their money.

Every parent wants their children to have a bright and stable future. Giving them a head start on understanding how money works is a crucial lesson that may not be taught in school.

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