As a new year dawns, financial planning firm Lemonade Money are calling for parents to resolve to improve their children’s money skills and help their offspring be more financially-savvy in the future.
Lemonade Money believes it is crucial parents encourage budgeting and saving from an early age; a view supported by the Money Advice Service who reports children’s money habits are formed by the age of seven, yet financial education is not mandatory in schools until they’re 11.
Our 10 tips are;
- Play ‘shops’ at home, invest in toys such as a cash register and pretend money and stock shelves with everyday items – cereal boxes, sponges, kitchen roll, biscuits etc. This develops their understanding of the value of money and that goods have to be paid for.
- Set up a ‘restaurant’ with place settings and pretend-food/money. After the ‘meal’ present a bill, count out what money is needed to pay for it or ask your child to be the cashier and give you change. This shows that more than just goods have to be paid for.
- Ask toddlers to help cut out money-saving coupons (using safety scissors) and when at the supermarket, play ‘I spy’, encouraging them to spot the discounted products on the shelves.
- Supermarkets are the favoured place for temper tantrums, if you can, hold firm and only buy what is on your list, rather than what your toddler wants. This – while a painful process – delivers a clear message that money should be spent on ‘needs’ rather than ‘wants’ which have to be saved for.
- Buy a piggy bank and set a savings goal; perhaps for a favourite toy or payment towards a day-out. Discuss how if some pocket money is set aside it can be used for something special (a valuable lesson in our credit-dependent society).
- Reward good behaviour/helping around the house etc with a small sum of money. Use stickers as ‘currency’ and a chart to keep track of the total. This reinforces the understanding that money has to be worked for.
- Older children may prefer a reward system based on digital games; doing household chores unlocks tokens which can be swapped for cash. Alternatively the ‘chores’ could buy additional ‘perks’ (unlocked in digital games as levels progress) such as a treat, mobile phone top-up or meal-out voucher).
- Get children used to taking responsibility for their own money with a pre-paid pocket money card. Go Henry is an allowance card for children aged six to 18 with parental controls. It’s an easy and fun way to pay pocket money while teaching good money habits.
- Set up a children’s savings account. It’s a great way of showing children how regular saving can generate extra money through interest – up to 4% in top savings accounts – and the minimum payment is typically £5 a month, so it won’t break the bank.
- Encourage extra earnings; additional income can be sourced from paper-rounds, car-washing, flyer and leaflet drops (from age 13) working in a cafe/restaurant, hairdressers etc (from age 14) and babysitting (from age 16). Working outside of the home for an income prompts prudent money management and addresses concerns that two-thirds of 16/17 year-olds cannot read a payslip and a third have never put money into a bank account**.
With no financial education in primary schools, parents must lead by example and help their children develop good money skills. These learnt behaviours will be invaluable in helping young adults make decisions on everyday issues such as tuition fees, student loans, credit cards and phone contracts etc.
For parents who feel their money management may not set the best example, www.lemonademoney.com has a free Financial Health Report tool which outlines where finances can be improved. Lemonade Heroes are on hand for those requiring additional support.
For just £49, the ‘Hero’ will undertake an initial 30 minute phone consultation, agree financial priorities, draw-up plans, monitor progress and provide support via email for a month.
Lemonade Money was launched in 2016 to complement Lemonade Reward, an employee benefits consultancy whose aim is to turn the sour world of financial planning into something sweet. From financial education to pension communication, Lemonade Reward provides a wide range of financial services for businesses. Where it stands out from the crowd however, is in its delivery, using interactive tools to make what are perceived complex topics simple.
Lemonade Money follows the same ethos – it was designed to help people with their personal finances by keeping things simple, affordable and most important, useful.