I find it challenging enough saving money myself, let alone teaching my children to do the same with their pocket money. So what is the best way to teach kids about the value of money in a way that they can understand and put to good use?
Saving is almost an entirely alien concept to a typical eight to 12 year old because it introduces the idea of long term goals rather than short term gain. It is worth remembering that children look to their parents for how to behave with money and they will normally only see their parents spending. This means the very concept of saving remains intangible and a foreign concept for children.
I have found it encouraging to read that some secondary schools across the UK are starting to teach money management. It's important this is tackled in schools but children do still look to their parents first to teach them about life and money.
To be confident with money, a child needs to be able to practise taking ownership of managing their own money. Therefore, for a parent to teach their child about money management, it's vital to help them set small, achievable, short term savings goals. Then the important bit is to help them spend it, so that you help your children learn to work towards something that they really want.
Once they have spent it, and all their money has gone, your child needs to repeat this cycle so that they understand the process of waiting, building up savings, and the need to start again. Letting your child save their own money means they will then understand the value of it, and realise it is precious. At the same time, you'll be instilling the lesson of spending wisely because they will understand what it is to have spent it all and not be able to afford the next thing they want immediately. These are all such important lessons for life.
The entire process can be helped along by technology. Children are great with technology and using interactive online tools such as PKTMNY will help make saving and spending clear and visual for them. They also allow children to learn through doing it for themselves, which is the absolutely best way to learn. My recommendation is to think about tools they can use or regular payments they could make, such as using their pocket money to pay for their mobile phone. In this way you'll be helping them learn how much things cost and start the process of them taking financial responsibility for their spending.
I firmly believe that children will only ever learn sound financial habits by being immersed in using money. Giving them the opportunity to do this for themselves, in a way that's managed and with the support of you, will mean they learn in the very best way.
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