Making Money Meaningful to Children

Even though children will typically have a lot of influences in their lives as they grow up, their inner circle of family and friend and, in particular, their parents, will usually have the biggest influence of all. Part of a parent’s job is to ensure that their children learn the practical skills they will need to see them through adult life and these days that means having a solid grasp of financial skills. The (very) early years The best time to start teaching your child the basics of money is when they start to display an awareness of it and an interest in it. This may be when they start learning to count or it might be earlier depending on the child. The key point at this stage in particular is to ensure that any lessons are put into a context which can be grasped by a young child. For example, an older child might grasp the significance of being told that it would take X hours of work to pay for a given item, but a younger one is likely to have much less of an awareness of time or a clear understanding of what working for a living means. Hence, the answer to a question such as “Is X expensive” is best phrased as a comparison to something a child can grasp e.g. “Yes, we could buy X pairs of shoes for you for the same amount of money.”. The older childhood years Once children have begun to grasp the passing of time in a meaningful way, then it becomes possible to teach them the connection between time and money and hence to help them develop an appreciation of the value of the latter. This is also the time when you can start helping them to learn the basics of earning a wage and managing their money by giving pocket money in return for helping with housework and then guiding them through the basics of budgeting with it. The Santa Clause Dealing with Christmas can be challenging for parents whose children are still young enough to believe in Santa Claus. One way to address this is to tell them that although Santa does indeed organise and deliver the presents, the parents of children who have been good are expected to make a contribution to help cover his time and costs and hence what children receive depends in part on what their parents can afford. To this might be added the fact that Santa is very careful about leaving live animals as presents as he needs to be absolutely sure that people have the time and money to look after them all year round. The teenage years This is the time when children begin to develop the maturity to understand adult concepts such as saving and investing and the difference between “good” debt (low-interest debt used to buy assets, e.g. mortgages) and “dangerous” debt (high-interest consumer debt). In addition to the connection between work (time) and income, they also need to learn to grasp the concepts of need versus want, cost versus benefit and risk versus reward. Teenagers are notoriously influenced by peer pressure, but it’s worth noting that the more financially aware a child is and the more they understand the reasons for their parents’ financial decisions, the easier it is for them to accept them, particularly if they’re given some input into the decision-making process. One way to deal with requests (or pleas) for “big-ticket” items (such as fancy phones) is to respond by asking the person making the request to come up with a concrete plan as to how to pay for it. If they do, then it may be reasonable for them to get the item. If they don’t then the ball stays in their court. Instead of refusing and trying to get them to understand your reasons, you’re challenging them to come up with a plan themselves.