Do you want your children to be financially savvy?

Many people would want their children to be financially savvy. Mr Financial has top tips for getting kids interested in managing money and advisable age ranges for when to implement certain learning tools.

Do you want your children to be financially savvy?

According to many published reports, children as young as three years old have the ability to compute ideas like spending versus saving.

A parent is a guardian and a guide. The guiding part of being a parent includes teaching your children the tools they’ll need to navigate life, and a big part of that is financial responsibility.

By learning from a young age, it’s ingrained and parents are bringing up a responsible generation of investors, consumers and savers.

Between the ages of 3 and 6

Teach the child to wait to buy something; instant gratification is dangerous and can provoke reckless spending in later life so the earlier this lesson can be taught, the better. The ability to delay gratification is proven to be linked to successful adults. There are some simple exercises you can apply at this age that are subtle yet, effective. For example, sit down with the child and make three vessels together – you can paint them and decorate them together. Label them something like “Spending” “Give Away” and “Savings”. When the child receives some money, talk them through which jar they want to put it in. Perhaps something they’ve seen recently – a toy they want for themselves or a cause they want to give money to. Explain that the savings jar means the money is safe and sound for the future.  With that saving jar, perhaps they could have a goal that they are saving towards (and it’s good if it’s a realistic goal that they attain relatively quickly). Make adding money to any of the jars a really fun and fabulous occasion and talk through their decisions!

Between the ages of 6 and 11

Teach the child to make choices about how to spend their money; outline that money does not grow on trees and we must always be wise what we do with our money. So when they want to buy something that might break quickly, or something edible, explain that they’ll have it for a short period of time, while buying something more hardy / useful will be a better investment into an asset. At some point, depending on the maturity of your child, you can start to talk to them about minor financial decisions. For example small things like buying unbranded items in supermarkets rather than branded and giving £5 to your child and asking them to select the fruit and vegetables for the family.

Between the ages of 11 and 14

Teach the child that the sooner you save, the faster your money can grow from on-going interest. The goals at this age can be stretched. You can explore long term goals and talk about earning interest on money you save and then interest on the interest using specific amounts as they’re more meaningful. Perhaps even make some maths problems out of it to supplement homework – but in a fun way. It’s good time to set a long term goal like a very expensive piece of technology and understanding he/she might want to sacrifice another area of spending to save more for the longer term goal.

In summary, for young kids into teenagers, whether you choose to be hypothetical with situations or use real money, children learn values from a young age and that includes their attitude towards money. Mr Financial recommends that a financially savvy child has more potential to make a financial success of his/her adult life, which is surely your aim as guide and guardian.

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