Five valuable financial lessons to help your children’s financial future

By Pooja Shah

Castlefield adviser Pooja Shah shares five helpful lessons to improve your child’s financial independence and ensure they are prepared for the future.

As a new mum, lately, I can’t help myself reflecting on habits I picked up from my parents.

I recall that my parents started teaching me about money when I was very young.

Early experiences children have with money can shape their financial behaviour as adults. So, some day, I would like to give my boy a head start with his financial future and teach him a thing or two about money management.

Research suggests that children who are encouraged to talk about money tend to do better with money when they grow up.

As parents, we teach our children to take care of their physical and emotional health. So, it only makes sense to teach them to take care of their financial health as well. I have listed some helpful lessons I hope to pass on to improve my son’s financial independence and ensure he is prepared for anything life throws his way.

1. The value of money

Lesson: Money is earned through work or effort and isn't infinite.

Teach: Explain how money is earned through jobs or chores, emphasizing that it requires effort. You could give them an allowance tied to completing specific tasks around the house, helping them understand that money comes from work.

2. Saving for the future

Lesson: It's important to save a portion of what you earn for future needs or goals.

Teach: Encourage them to set aside a percentage of their allowance or any money they receive as gifts. You can use a piggy bank or open a savings account for them to help them watch their savings grow. Explain the concept of interest and how saving early can benefit them in the long run.

3. Budgeting basics

Lesson: Learning to budget helps manage spending and ensures you don't run out of money.

Teach: Help them create a simple budget that lists their income (allowance, gifts) and expenses (toys, snacks, etc.). Show them how to allocate money for saving, spending, and maybe even giving to charity. This teaches them to prioritize their spending and live within their means.

4. Making informed spending choices

Lesson: Not everything you want is worth buying; make thoughtful choices with your money.

Teach: Discuss the difference between needs and wants, and the importance of thinking before spending. Encourage them to compare prices, look for sales, or even wait a few days before making a purchase to see if they still want the item.

Money saved today can go a long way tomorrow!

With the upheaval in the finance industry over the last decade with the rise of online banking, the idea of credit cards and digital wallets may offer the ultimate convenience, but it also presents dangers for children (and adults) because it makes it too easy to spend money. It’s a known fact that it’s more figuratively painful to part with actual money than to pay with a credit card. Children need to learn this discipline before they move on to using credit cards.

5. The power of giving

Lesson: Sharing your money with those in need or supporting causes you care about is important.

Teach: Introduce the idea of charity or giving to others by encouraging them to set aside a small portion of their money for donations. This helps them understand the importance of generosity and how their money can have a positive impact on others.

By consistently reinforcing these lessons through everyday activities and discussions, my hope is my son will develop a strong foundation in money management that will serve him well throughout his life.

Some fun ideas we used at our home when I was growing up to learn about money:

  • Used savings jars
  • Played budgeting games
  • Money missions
  • We were encouraged to count coins
  • We would go shopping together
  • Took a trip to the bank together
  • Was taught online banking at the right age

Teaching children about money can feel like an overwhelming task, but it is one that is fundamental to make sure that our children know how to manage their finances well later in life.

One of the important things to remember when thinking about financial education for children is that as a parent, you are setting an example for them about how to handle their finances later in life.

We understand that it can be difficult to juggle the often hectic parenthood with additional teaching, but to ensure our children know how to successfully manage their money when they are older, taking the time to show them now is well worth it.

Money saved today can go a long way tomorrow!