If you’ve ever been faced with a mortgage application and found yourself wishing your school’s curriculum had included financial education, you’re not alone. Many industry specialists have been calling for better financial education in schools for some time, including top companies such as Aviva and Standard Life who have recently backed a new education programme for kids called KickStart Money.
If your child isn’t one of the lucky 18,000 to be targeted by KickStart Money over the next few years, chances are that educating them on finance will be left solely to you. Make sure your kids get the best start to their financial life with these top tips on how to teach them about money.
Why should we teach young people about money?
Whether we’re talking teens or tots, starting a financial education early can not only encourage good spending and saving habits in later life, it can also save them years of stress when faced with financial situations that would otherwise be unfamiliar.
In today’s economic climate, being smart with your money is more important than ever.
Online shopping, for example, can make overspending easy and 95% of millennials now admit to impulse shopping online. Similarly, living costs are skyrocketing with rental prices going up and the average deposit for a mortgage in the UK totalling a whopping £20,000. Laptops, smartphones, broadband contracts, and streaming services are also increasingly becoming part of everyday life – both for work and leisure – and, while previous generations reap the rewards of free education, upcoming students will have to face mounting student debt.
Faced with all these challenges, it’s no wonder young people find money talk overwhelming. However, by making sure they have a good knowledge of personal finance, you will give them the tools they need to navigate adult life with as little stress as possible.
How can we teach young people about money?
- A good financial education should start young; as soon as a child is capable of comprehending the concepts of money and spending, a small allowance will give them the chance to start taking responsibility for their own finances. The amount they receive can increase with time or be added to via chores but make sure this allowance is finite or they won’t learn any lessons!
- Give kids as much responsibility as they can handle early on – let them set up their own bank account and pay some of their own bills, such as mobile phone contracts if they want one. Encourage them to take on part-time work or chores at home to earn the money to do so. Teaching them an appreciation for money and its limits will instil healthy spending and saving habits from an early age.
- Make them aware of the wider consequences of poor money habits, such as taking out credit cards they can’t afford or borrowing money they can’t pay back. This Cost of Poor Credit Calculator is a good way to show them the consequences that bad decisions could have later in life.
- If your child is a teenager or returned from university, charge them a reduced rent so that the rental market doesn’t come as too much of a shock. If you don’t need the money you can always set it aside in a deposit fund that you can give them later.
- Give children a good grounding in the basics of finance, including how certain financial concepts such as mortgages, credit cards, credit scores, interest, debt, and savings accounts work. Having this prior knowledge will prepare them well for adult life and save them the stress of trying to work things out for themselves.
Teaching your teens about finance now could save them a world of trouble later in life (and you a whole lot of stress!).
Make finance simple and easy-to-understand, and your kids should grow up into well-equipped, responsible, and independent adults.
*a collaborative post*