Managing money – lifelong skills that kids are never too little to learn!

If you are a parent, you will know that you’re constantly providing a role model for your kids. Often, you will see yourself mirrored in your children’s behaviour, which can be disconcerting to say the least! Being a positive role model will help your children to develop effectively in all sorts of ways. So it’s not surprising to learn that how you manage your money is the most important influence on how your children will deal with it in later life.

Research from the University of Cambridge has shown that kids’ money habits are formed by the age of seven and children as young as three years old can grasp financial concepts such as saving and spending. The message loud and clear is that it’s never too early to start teaching kids about the value of money. Good habits developed now are more likely to lead to sound financial planning and money management in later life.

Obviously, the concepts that children understand will depend on their age. For example, understanding that they may have to wait to buy something they want will be an important life lesson that three to five year olds should be able to grasp. From the age of six, children can begin to learn about making choices in terms of how to spend their money. By age 11-13, they should grasp that the sooner they save, the faster their money can grow from compound interest. It really is never too early to start saving for a pension!

You won’t always be able to influence the way your children manage their money, so it’s important that you set them up from the start. Here’s our pick of experts’ top practical tips to encourage effective money management skills:

1. Explain how money works, particularly that there’s not an endless supply of money available from the cash dispenser.
2. Build your child’s money skills for example by playing ‘shop’ or similar games
3. Give your child a small amount of pocket money that will enable them to buy, for example, sweets, a comic or ice cream. Encourage them to use this money to buy something they want, whilst developing an understanding that they will have to make choices in terms of what they can afford.
4. When your child wants to buy something, help them to count out the right amount and allow them to hand it to the shopkeeper.
5. Teach your child that they can earn some extra cash in return for completing additional tasks around the house, for example by washing the car or raking the lawn.

In our increasingly cashless society, it’s even more important that children learn the self-discipline and knowledge to embrace effective financial planning in later life.

After all, you’ll want any legacy you leave to be spent wisely when you’re no longer here to guide them.