Teaching your children about money could increase their chances of a financially secure future. Yet explaining financial concepts in a simple and engaging manner isn’t always easy.
Here are some tips on how to bring money matters to life, no matter how old your child is.
Involve your children in your finances by going through your bank statements, explaining your spending and how you manage your account. Ask for their help in establishing where costs could be cut. Make it fun by getting them to design their own bank statement or account, and then chat about how they would use this.
2. Set a savings goal
Encourage your children to start saving towards something they want – such as a new game or toy. Ask them to calculate how much they will need to save each week or month, and for how long, to meet the cost. This could help to build a valuable savings habit that will potentially build their future wealth.
3. Lead by example
You could demonstrate the value of regular saving and investing by opening an account on their behalf. For example, you can save up to a maximum of £9,000 into a Junior ISA in the 2023/24 tax year to benefit from tax-efficient interest and growth. You can demonstrate that the sooner you start, the bigger the potential pot your child will have when they reach age 18.
A Junior Investment ISA could help you explain the basics of investing, such as the relationship between risk and reward. Once they reach age 18, it will automatically convert to an adult Investment ISA.
4. Give jobs a reward
Boost your child’s pocket money if they do chores around the home, such as tidying, ironing or cleaning the kitchen. This will provide money that can be put towards their savings goal. The harder they work, the greater the rewards – and the sense of achievement.
5. Pay bonuses – and consider deductions
If tasks are completed without prompting, pay a small bonus. Conversely, if tasks aren’t completed successfully, consider a deduction. Consider a monthly statement to show their earnings, and how these have accumulated.
6. Free online resources
There are plenty of free online resources. For example, if your children are a little older, the Open University offers a course on managing money for young adults which can be done at home. This can be used for the Duke of Edinburgh Award skills development.
There are also lots of games and apps that can help you to teach your children about money, including apps that take the hassle out of paying and tracking pocket money.
The value of investments can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
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