Creating Good Money Habits With Your Children

I often deal with several generations in a family in helping them with their financial arrangements and it will come as no surprise to say that often, our children’s approach to money is influenced significantly by our own habits and experiences. Good habits are great, but bad habits can also inherited and that is where we should be most concerned!

Despite years of discussions, the subject of personal finance is not on the national curriculum in our schools and I feel this is a real shame. As a result youngsters can leave school with their only experience of finance being on the receiving end of their parents/carers circumstances and I think we can say this is not ideal. They leave school, go into further education and that new found independence hits them like they never expected. They go from a life where spending money only involved getting something in return; new clothes, a new computer game etc. to a grown up life where they have to buy food, study books and everyday living costs etc.

In my opinion by the time they leave school, the habits they have already shape how they are with money. They will be several years past the point of being receptive to your guidance (!) but some years away until they are prepared to be open to a partner’s suggestions. Financial no-man’s land if you like!

So creating good habits must start sooner, but how? When I was a youngster, I remember my Grandmother giving us money for birthdays which went into a post office savings account. I remember the savings book, the interest earned and I recognised that the more I put in the more interest I received. I remember what I used it for and it was a good way to reach a target of a new bike and a new vinyl album (remember those!). These days with interest rates being almost non-existent for savings, we run the risk of youngsters thinking ‘credit’ is the only option.

From a young age, getting them to make a decision with the weekly shop is a great idea. We all know that supermarket deals may not be all as they appear. How about giving them a few pounds and letting them make the decision on which toothpaste or orange juice to buy and then discussing with them what value means?

There will always be something they want to save for – so get them in the habit of saving as soon as possible – whatever it is. Pocket money should be as much about saving it as well as spending it. We all like to be impetuous occasionally, but buying a new pair of jeans now should be seen as a delay in reaching that bigger target in a couple of months. Reaching a target is easier if you buy less stuff on the journey!

Get them involved in a clear out. Car boot sales, ebay and Gumtree to mention just a few, are great ways for youngsters to learn the value of money. Maybe to realise that disposing of what you no longer need before buying something else is a good idea.

One final idea – we recognise that what often takes us ‘oldies’ a long time to do, can take our children a fraction of the time with technology. When was the last time you looked at your utility costs, perhaps on a comparison website? How easy was it? Why not encourage your children to help identify the savings utilising their IT skills and reward them with a percentage of what they save you?

Author: Phil James, Grosvenor Consultancy Ltd

There are advantages and disadvantages to using all of these strategies and they depend on individual circumstances so don’t take action without seeking competent advice. Tax rules, rates and allowances are all subject to change. The Financial Conduct Authority does not regulate tax advice and some forms of offshore investments. The value of investments and the income from them can fall as well as rise and you may not get back the full amount you invested.

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