As parents, you are responsible for teaching so many life lessons as your children grow up. From taking first steps, learning to ride a bike and even some practical DIY and home skills; you are there to help them figure out the ways of the world.
But there is one life skill that everybody should learn to master: money (and how to manage it).
At Bank of Ireland, we understand the subject of money can be a difficult one for many people. After all, money management has become more and more complex, not to mention the confusing financial jargon and lingo that surrounds it... This is why we have developed a new approach called the ‘F-word’. That’s right, the ‘F-word’. ‘F’ is for finance of course (why, what word were you thinking of?) and how can we expect to learn about it if we don’t talk about it?
We want people to have a better understanding of money and their personal finances through open and meaningful conversations. By doing so, you can learn how the financial system relates to you personally, allowing you to make more informed decisions. Leading research has shown that children as young as 3 can develop an awareness of money and, by 7, develop money habits that will stick with them for life. So isn’t it important to start them off on the right foot?
With that in mind, let’s look at some financial lessons for your children.
It might not sound like the most exciting lesson but for your children it is essential life skill. Having a chat about budgeting should focus on the importance of making their finances visible because budgeting is the process of examining how much money they receive and how much they spend. By doing so, they can start to see where they can save money and also understand what their weaknesses are when it comes to spending money.
So, when they get some money of their own like pocket money, birthday gifts etc. sit down and discuss with them what their plans for it are. To have an idea at an early age how to manage their money will stand to them when they go out on their own to work or college. Set up their budget every week/month and try to stick to it. Remember that it is important to have fun too, so this should be part of the budget as well.
It is important to instil a savings habit early. The 50/30/20 rule is a guide for how to successfully and simply manage money. 50% on needs, 30% on wants and 20% to savings. While needs vs wants may not be applicable to young kids it can really make them stop and think. Setting up 3 money boxes could be a fun way to illustrate this rule. Use one money bank for longer term savings (like their summer holiday or for a new device) and then the child can decide what way they will proportion their money across the other two. It’s important to understand the difference between a need and a want. A need is something essential, like food and clothing. A want is not an immediate priority, but is something you would like to have. Explain the importance of saving for life’s little emergencies, like a bike puncture, broken screen or other unexpected expense.
Money makes the world go round
Life is a marathon not a sprint. While developing a financial plan, it is important to keep long term goals in mind and not get side-tracked by short term fads. These long term goals could include a first car, a trip around the world after college, or even starting their own business. Children of all ages will benefit from a practical discussion about money; that it is precious and finite and needs to be managed each and every day regardless of the endless temptations to spend it.
It is important to keep in mind that any money conversation with children, starting at a young age, will be a massive life lesson for them. So, why not make today the day you start teaching your children about the ‘F’ word.
Check out the FREE resources on the Bank of Ireland Youth Literacy hub for further information and support tools, it’s a great starting point to teach your children about money.