When it comes to understanding how to manage finances, teaching children good money habits is so important. In fact, the earlier children develop a good understanding of using money, the better they should be able to manage money throughout their life.
Many children have little experience of managing their own money until they become an adult and become responsible for their bills, which can leave them at risk of getting into debt or missing payments. To help them avoid getting into this situation, here are some top tips for teaching your children good money habits:
Get children used to paying with money
When your child gets to the right age, you can allow them to pay for items using money. For example, if they go to the shop for some sweets, or you are buying the supermarket shopping, you should let your child pass the money to the cashier and get the change. This will help them to understand the value of items, as well as getting an idea of how these transactions work.
Teaching your child to save up is also very important from an early age. You can start with a money box while they are very young and then open a savings account as they get a bit older. The Young Savers account through the Central Liverpool Credit Union is a great option for encouraging regular saving and seeing savings grow.
Reward good money habits
Banks do not have particularly good interest rates for savings now, but you can provide an extra incentive to your children to save up. For example, you could offer to top up savings when they reach an amount, such as for every £9 they save, you will add an extra £1, which will give them an added reason to keep saving.
Give your child an allowance
As they get to high school age, giving them an allowance, each week will help them to learn how to manage their money. If they buy a packed lunch, bus tickets and any other items they need for school, get them into the habit of paying for these out of an allowance.
Develop a chore-based allowance
For children to establish the link between working and getting a financial reward, having a system where they perform household chores in exchange for cash will help them to develop the idea of how you get money.
Be a good financial role model
Your children are establishing how to spend money by watching the people around them and this will mostly be by watching how you manage your money. Try to display careful money management to your children and explain why you cannot afford big purchases or discussing that you will need to save up to buy something you want.
Have regular money conversations
Make sure that you have regular conversations with your children about money. When you go shopping, explaining that they can have 3 t-shirts priced at £15 each, rather than one at £45 is another good way to show them the value of money and giving them decisions to make will also help to educate them.
By keeping your children well educated about money, the transition to becoming financially independent will be much easier. The Young Savers account from Central Liverpool Credit Union is a great way to start. You might also have heard about the LifeSavers account, which is the only children’s credit union savings account available through schools. Our Young Savers account also allows for gift vouchers which can be paid into the account, which is perfect for Christmas or birthday’s. Lifesavers offers easy access accounts that can help your child develop long term goals when it comes to money.