Five tips to teach your children about money
It’s never too early to start teaching children about money. Financial education is one of the most important lessons to learn and the current climate provides an excellent opportunity to start that conversation.
I am a firm believer that all young people should have access to financial education. It can start at home with involving them in discussions about budgeting and how much things cost, but schools should also play their part. Both teachers and parents can set the foundations for actions that will benefit them in later life.
For parents who are looking to educate young people about finance and make them aware of the advantages of budgeting, saving, investing and giving back, here five important tips.
1) Start investing early
Taking small steps by investing little and often from an early age can make a dramatic difference to a young person’s future, giving them a head start towards financial security.
For example, investing £5 a day, into a pension, up to the age of 10 can lead to a £1m+ investment by the age of 65*, taking compound growth into account. Or, a smaller amount of 50p a day could return £100,000 over the same period. The important thing is to start investing as soon as you can so that your money has plenty of time to grow.
* This assumes an annual growth rate of 7% net of charges. This figure is an example only and is not guaranteed. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this.
2) Make learning fun
It’s a stressful time for parents, with juggling childcare and in some cases, homeschooling, on top of work and managing the household. However, there are a number of fun, quick and simple ways to start teaching children about money.
Virtual games-based lessons are often free and can include everything from budgeting and saving, to risk and reward, the basics of investing and how interest works. These programmes can help young people be better equipped to make smart financial decisions when they are older.
3) Lead by example
Ensuring people have the ability to plan, grow and protect their financial future and achieve financial wellbeing in a world worth living in is so important.
It is equally as important to be able to share and teach these skills to our children, so they can grow up with a sense of confidence towards money and know how to make informed decisions throughout their lifetime.
In doing so, we can all take a moment to consider whether we are leading by example with our own finances and, if not, see where the opportunities are to make adjustments.
4) Give them more emotional and financial support
It’s likely that your children will need extra support during these unprecedented times, whether they are young and home from school, or older and back from university.
Thinking about money as a family is a great place to start and has the added benefit of introducing younger generations to financial planning. The impact of coronavirus can prompt us to teach young people important life skills such as how to adapt to current circumstances and avoid financial strain, while still saving for the future.
5) Set a goal
Whether it’s buying a first home, paying for further education or travelling the world, setting a goal and putting money away to save for this early on in life can make it achievable. The longer the investment has, the greater the benefit will be from potential year-on-year compound growth of reinvested returns. For example, investing £200 a month into an ISA for five years can grow to over £13,000*.
* This assumes an annual growth rate of 5% net of charges. This figure is an example only and is not guaranteed. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this.
Teach your children to take more control of their life
It is hugely empowering to take control of the elements of your life that you are able to and teaching tomorrow’s generation the correct behaviours now when it comes to money can help to set them up for the years ahead and a life of financial wellbeing.
Harriet Shepherd, Marketing Propositions Manager, Workplace Financial Wellbeing, St James’s Place.
Photo by Jordan Rowland