Teaching financial responsibility to your children

We don’t talk about money

Let’s take a moment to appreciate that the generations before us deemed money to be a private matter, often inappropriate for children and that they needn’t be burdened with such concerns. In the past, financial education was not really part of the curriculum and parents didn’t have the knowledge or resources themselves. We now see that this is not always the case and communication around money is starting to become more open.

So, when do you start to talk to children about money?

It’s important for children to be introduced to foundational financial concepts early so they are able to have a healthy attitude and understanding of money. Money habits are largely set by the age of 7. At this age they have begun to understand basic concepts such as counting, the value of money and the difference between needs and wants.

As with most things in life it is far easier to learn by doing than listening, so allowing children access to money and options of what they can do with it will help them learn how to use money. These are things that you can start from an early age and ideally starting when the children are still in primary school:

• Delayed gratification
• The difference between price and value
• Social pressure around buying stuff!
• The value of earning money

How do we support financial foundations in an age-appropriate way?

As children grow up, they need and want more freedom, which also means more responsibility. This should be the same for them when it comes to money. Giving them access to money to spend and to save, will help them make their mistakes with money in a safe and protected environment.

Many banks offer different software and incentives to help engage children with money. You may have heard of Go Henry and we had even had Rooster Money as guests on the Podcast. The truth is any of these are just tools to help provide a starting point. The main driver to good money habits is open communication between you and your children about money and slowly giving them more responsibility with their own money.

How we are trying to educate our 11 year old:

• We have set up a bank account for him, so he has access to it online and a bank card to use for spending (remember their generation will not have the same affection and appreciation of cash that all previous generations had).
• We set up a regular payment to the account (pocket money) so he can spend it on whatever he wants (which currently, is chocolate).
• When we plan family days out, we tell him about them and that they will involve extra spending on fun things, and the cost of them. He will need to save a portion of his pocket money to pay for some of the fun activities.
• In the weeks before the day out if (when) he overspends on chocolate and he can’t save enough before the big day out, then he is allowed to earn extra money by doing extra jobs for the family. This will hopefully start his understanding of the value of money and the value of work!

Remember educating children is not an exact science and that you and your children will make mistakes in the process, but talking about them and allowing them to have practical experiences will help provide a healthy environment about money.

Guiding Your Adult Children Toward Financial Responsibility

Adult children may be settling into Uni life for the first time right now. They will have more freedom than ever before, but of course this comes with more responsibility as well. Helping them build some basic financial knowledge when they start University will be invaluable for them.

1. Firstly budgeting, dealing with things such as rent, food cost and study books for the first time and knowing what bills are coming ahead is an important budgeting skill to learn. Detail with your young adults all essential costs for the semester then this will allow them to plan what funds they have available for enjoying their time at university.
2. Be aware of interest free overdrafts! Nearly all banks will offer students a free overdraft; while having capital available for emergencies is not a bad facility to have access to, it can be a very easy habit for students to “live off their overdraft.” This can become a very expensive way of living if they continue with this habit as they enter the world of work after university. Of course, the banks are well aware of this and are the ones who benefit from this very common bad habit! Spending a little time educating your adult children on the dangers of “living off their overdraft” will be time well spent (and money well saved in the long term).

The Next Steps with Ovation

Helping your children build strong financial habits early on will set them up for a lifetime of success. From a young age to when they’re just starting university or preparing for life beyond education, instilling smart money management skills is crucial. If you feel your adult children would appreciate further guidance in their financial journey, we’d be happy to have a chat and help them take the next steps toward securing their financial future. Contact us using the details on the following page.