How to ensure your children have an understanding of money

Contrary to what some children might think – money unfortunately doesn’t grow on trees and as a parent it’s difficult to know how to teach your children financial education matters in today’s digital world.

We caught up with father of four and Guest Blogger Clint Wilson to find out the methods used in his household…

Rebrand ‘pocket money’

While parents give their children pocket money to encourage responsible spending and saving habits, children often see it as a treat and have a tendency to want to blow the whole lot in one go. In our house it was always Moshi stickers and gel pens. Perhaps the root of this problem lies in our use of the term ‘pocket money’? It implies something that is easily spent, a treat to spend on sweets or comics, knowing that for important purchases like trainers for school, the bank of mum and dad will cover the cost. An ‘allowance’ on the other hand, suggests something that requires budgeting and more careful management. It’s typically something given to older children. Don’t believe me? Try telling your 15 year-old he can have his ‘pocket money’ in front of his mates and see his reaction.

The other problem with the term is that it can create confusion around paying for things online. There is a danger of allowing children to develop a disconnect between pocketed pocket money, physical currency, and pocketless electronic money. By changing the name to ‘allowance’ it may help children realise that money is equal in value however it is spent, be it from an electronic wallet or our physical wallet.

We could start our children’s financial education by changing the words we use. Parents often use the term ‘allowance’ when their children go to secondary school, but how about introducing it earlier, while they’re still at primary school, aged 7 or 8.

The best way of learning is through doing, even if it means making a few mistakes along the way. So, at the same time as introducing the term allowance, make it meaningful to your child.

Give children more responsibility

We all spend much more on our children than the pocket money we give. So, consider giving your child some control over elements of the wider spending. My wife and I tried allocating some of our daughters’ clothing spend to their allowance and, after a few mistakes, they have become much more responsible with money. Rather than buying the first dress or top they see, they now spend longer looking for something they really like, or one that’s on offer -meaning their money goes further.

Don’t ignore online spending

Buying online is an integral part of most household expenditure and it’s important to introduce this early to young people. As well as understanding the value of money, however it’s spent, children need to appreciate the risks and benefits of buying online. If you currently use your card for their app purchases or music downloads, consider making this spending part of their allowance.

Once children are old enough to use a computer without full time supervision, then they should be taught about spending safely online – it’s all part of keeping them (and their finances) safe. How to identify a secure site, enter card details correctly and complete the banks security checks are all important skills for children to learn.

Consider a child-focused product

There are prepaid debit cards available, such as nimbl specifically designed for young people and it’s a great, safe way to introduce them to learning financial confidence. nimbl allows us to set spending controls and even decide how/where they can use their card (online, cashpoints etc.). We get an alert every time they use their card and our girls can check their balance and add money to their savings, online or via an app. It’s really helped them learn to spend and save more wisely.

Empowering children to make better decisions, by giving them more responsibility, is all part of them growing up to become responsible, confident and competent adults. Done in a controlled way, with supervision, this is a great way for them to learn. Don’t be afraid to start early.

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