How to teach your child money management
Money management is a key life skill that every child should learn. Some people argue that schools should teach money management, whilst other people think that parents should teach it at home. I say that if parents can teach their children how to earn and save money they should do so. There are plenty of programmes and activities available to help you. I will share some recommended links in this post. If you can show your child how to be thrifty and save for things they want, you’ll be setting them up for life.
Here are some tips on how to teach your child money management.
Money is Weird
Money is a weird abstract concept. Humans have created a unique way to trade goods and services using paper and bits of metal to represent something of value. In addition, we are expected to work to gain these pieces of paper and bits of metal. And not just any pieces of paper and bits of metal, they were specially designed by The Bank. You cannot just write £10 and draw the queen on some green paper and expect to buy sweeties from them, (which I generally thought was possible as a child). My brother had to explain to me that was forgery, and it was wrong. So how do we teach children the value of money and how to earn it?
Start with Play
Young children learn through play. I remember receiving toy money from Santa Clause in a department store when I was about 4 years old. I played ‘shopping’ with my toys. The teddy bears would go to the shops and hand money over to another teddy to purchase something. I had no concept of what the paper and plastic coins stood for, but it was something I witnessed grown ups doing in shops. Therefore, I highly recommend you give your child some play money when they are young.
In addition, playschools often have little shopping stalls with plastic food and veg so children can pretend to be buying and selling things from each other. They may not understand the value of money, but it teaches them that taking stuff without paying for it is wrong. They learn key social skills and it is a good way to teach your child money management from an early age.
When your child grows up a bit more they will need to learn the three attributes to learning Money Management.
Three Attributes to Learning Money Management
(N.B. This paragraph contains an Amazon Affiliate. Therefore, if you purchase the item Sops and I may make a small commission. For more information read our Affiliate Disclaimer).
Holly Reid, the author of “Teach your child to fish,” explains that to learn good money management children need to:
1. Be a good attentive student
2. Contribute to the Household
3. Learn to be Entrepreneurs
She explains how important it is for children to learn that money comes from hard work. I remember how my parents used to take cash out of a cash machine and I just thought it was “ready money”. I couldn’t make the connection between my father going to work every day and then having money to spend as a result. And so, when I turned 18 and was given a credit card for the first time, I had no idea how it worked and that I had to pay it back. I got into a lot of debt. I really wish I was taught good money management skills as a child whether it was in school or at home.
So how do you teach your child money management skills, so they don’t find themselves in a financial pickle later in life?
Good Students
Holly Reid says we need to encourage our children to be good attentive students, so they are interested in learning about money management. How do we do this? Simple. We engage them with something they are interested in. No child wants to look at complicated boring Excel spreadsheets of the household budget. Reid suggests making the most of an opportunity to teach your child money management if they have shown an interest in something they want, for example a party with their friends.
The first thing you need to ask them is to create a list of everything they want to do during the party and what they will need. Perhaps they can create an ‘ideas’ board?
Secondly, ask them to research the cost of everything they want to buy for the party. Encourage them to do a price comparison between branded and non branded products, as well as reading reviews on products.
Thirdly, set a reasonable budget for them. Ideally less than whatever they totaled up for their party. This means they will have to rethink the party and start to come up with inventive alternatives to budget for it, such as borrowing a chocolate fountain, or offering entertainment themselves rather than hiring a clown.
Lastly, after the event, be sure to review it with them and ask them to write down what they have learnt about planning and budgeting for an event. This is a subtle way to teach your child money management.
Contributing to the Household
In my post, How to unspoil you child, I explain that in the past children were expected to make a contribution to the household for their very survival, such as helping out on the farm during the harvest time. Nowadays there is no such expectation and so children cannot make the link between work and gaining what they want or need. They just receive instant gratification without understanding the importance of making a contribution to the household as a valued member of the family. However, nobody likes cleaning up after someone else who is capable of cleaning up after themselves.
Therefore, a child needs to do some chores about the house, but not expect payment. This is so they can learn good housekeeping skills. However, it is a good idea to select some chores for your child to do to get paid. This is how they will learn to earn some money for themselves, as opposed to just receiving a weekly allowance for doing nought.
For more information check out our post “How to Encourage your child to do Household Chores.“
GoHenry App
There are some schemes to help your child manage their pocket money and learn how to spend and save it. For example, the GoHenry card is a prepaid Visa card for children. As a parent you add money to their account and you set how much they receive on a weekly basis. You can also associate chores with their allowance. You need to tick off the chore on the App before they are allowed access to their funds.
Sops and I tried the GoHenry App Free for a month. We liked the concept of the card, but we did run into some problems in that first month. Part of it was my fault, as I did not set up the account correctly. This limited the amount of money Sops’ could spend at any one time. There were a couple of times her Visa card did not work in stores, which caused embarrassment.
However, this facility has it’s uses as she did over spend in a sweet shop at one point, when I was not present. I knew how much she spent as my GoHenry App ‘pinged’ me to informed me where she had just spent money. This is all very good and well, but if she wanted to buy me a birthday present with her GoHenry card, I would know which shop she had bought it from.
In addition, the App was not working when we went on a shopping trip. I was able to adjust the settings via the website, but that was an inconvenience we could have done without, as we were testing the card out for the first time.
The GoHenry App has received great reviews from national newspapers, and it is a good way to show your child how to use a Visa card. It also allows your child to save incrementally. But I think Sops and I will continue to use physical jars. They are free to use and she has different jars for savings and Christmas etc.
There are quite a few banks offering prepaid Visa cards to children for free. But parents don’t have as much control on their child’s spending as the GoHenry App offers.
Becoming an Entrepreneur
A child can become an entrepreneur at any age. Jack Bonneau is only 13 years old and is currently one of the youngest most successful Entrepreneurs in the US. He simply set up a lemonade stand in his local farmers market and is now a CEO to a franchise company.
Watch the video below with your child to inspire them. I know Jack inspires Sops and me.
NB: If your child is interested in running a lemonade stand make sure they are doing it legally. I have added some advise on our 17 Activities to do this Summer post. There are a few protocols to follow before setting up a stand.
Running a Business is Hard
A few weeks ago Sops’ expressed a desire to run her own business. She had seen a child on Tik Tok run a business selling fidget toys and was inspired. She had a splendid idea, that was similar to the girl she had seen on Tik Tok. It would require buying products in bulk and she would package them up and send them to customers. I told her it was a good idea, but would require me paying up front for the products and what happened if the products did not sell?
I told her to research what it takes to start up a business for children, and I shared some links for her to look at. Then I had a bath and when I came downstairs I asked her what she had learnt. She said, “Running a business is so hard mum. I just wanted to put things in boxes and send them.” This comment made me laugh. She admitted she was too lazy to run a business. I told her she could have a job packing boxes in a factory one day, but those jobs do not pay well and you will soon get bored of that too.
But at least Sops knows the truth. There is no point encouraging a child to run a business if there is a danger they will give up on it. It’s like buying them a guinea pig and they only bother to clean out the cage a couple of times and then you are lumbered with the weekly job.
Therefore, if your child is serious about running their own business they need to be informed how much time it will take to run the business. What they may have to sacrifice to run it, e.g play time with friends. They need to know what the rewards are likely to be and what the risks are so they can make an informed choice. Once again, I will refer to the first point that Holly Reid mentions, children need to be good attentive students. They need to have an vested interest in the venture. Just like Jack Bonneau wanted a $400 Lego model, and so set up a business to raise the funds to buy it, your child needs to be just as motivated if they wanted to earn their own money and put the effort in.
Start Up Business Ideas
If your child is serious about starting their own business be sure to help them create a business plan. Money Prodigy recommends 7 Free Business Templates for children.
Here are a few business ideas your child can start with very little outlay:
- Dog Walking
- Cat Feeding
- Baby Sitting
- Gardening/lawn mowing
- You Tube Influencer
- Ebay Seller
- Selling handmade items on Etsy
- Photographer
- Tutoring
- Car Washing
Useful Websites
The masterplaybook.com
Young Enterprise.org
Money Prodigy
Barclays Bank
Youth Employment UK
Comments
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