03/03/2015 16:11 GMT | Updated 20/05/2015 10:12 BST

Are You Teaching Your Child Money Management?

girl putting coins into different glass jars under her mom's guidance at home.

One moment your child's popping pennies into a piggy bank, the next they have a credit card.

My children were amazed when their banks offered them credit cards with several thousands of pounds of ready credit. The fact they were still students and not earning was irrelevant as far as the bank was concerned.

But students need to budget: my children knew students who blew an entire year's loan in a few weeks, simply because they had never budgeted before – and who assumed their parents would top them up.


How much do you teach your children about money-management? What kind of role model are you? If you buy on credit, are your children going to follow you?


My parents believed you should never buy anything you cannot to pay for with savings: take advantage of interest-free credit, but save for anything else. This served their frugal post-war generation well, and, bar their mortgage, they have never borrowed a penny. Is this approach now outdated?

More than half of 25 to 34-year-olds thought the reason many people struggle with money is because their parents don't teach them how to deal with finances. Or is this another example of children blaming their parents?

Financial management is now taught in schools, as part of the maths and PHSE curriculum at Key Stages 3 and 4.

The Bank of England already has information on its website where parents, teachers and young people can access the Made of Money interactive information.

But is this going to help, or does money-management really begin in the home? Will children connect a maths lesson with the reality of wanting designer trainers now - and will they be prepared to save? Do you tell your child you cannot afford to buy them something – or slap it on plastic and forget the cost?

Malcolm, who has a six-year-old son, has firm views on this: "I think the concepts of credit, debt and indeed saving need to be introduced to children early on so they have the opportunity to experience them in a controlled environment prior to them meeting them in real life.

"Some parents have become very complacent regarding debt and this can easily be transferred onto children if they are only exposed to the positive side of having money up front. Schools could certainly do more to assist beyond the mathematical side of money and finance, but it will always come down to how we as parents expose our children to credit and debt."

What has Malcolm put into practice with his son?

"I introduced the concepts to my son when he was five. We started by using star charts to allow him to earn rewards (saving) and then moved on to allowing him to go into debt by letting him receive payment in advance for jobs etc. that he plans to do in the near future.

"We then made a massive deal out of him not doing the jobs he had already been paid for promptly to introduce him to the negative side of debt. He has already become very pro-saving and only tends to use the debt option when he is just short of something he thinks he really needs."

Is this approach by Malcolm unusual? My children learned about credit but not so much about debt. A 'loan' would amount to a week's pocket money in advance, or a top-up until they received some guaranteed birthday money from a grandparent.
In their early teens we experimented with 'allowances' out of which they had to buy everything including non-uniform clothes. This proved hard to manage: where do you draw the line when clothes they need for school- such as a coat or shoes – could also be worn out of school? If they are supposed to be budgeting for their own toiletries do you go as far as toothpaste and soap?

In the end we abandoned the allowances and reverted to pocket money- but only until they had Saturday jobs. Once they had part-time jobs, they were encouraged to save for whatever they wanted and to look out for the best interest rates in savings accounts.

Laura described how her parents taught her to manage money, and how she now teaches her son, aged 10, and her daughter, aged 12.

"My parents were quite well off when I was growing up and could have given me more than they did but what I really think I benefited from was that they instilled a work ethic in us and an appreciation of the value of money, rather than just handing cash over.

"We were given a sensible amount as pocket money but could earn extra in their business, helping out from our early teens and around the house before then. We were encouraged to save up for things we wanted, not just bought them as some of the other kids we knew were.

"We are now in a financially fortunate position and I will be taking this approach with my children - I don't buy expensive presents and encourage them to save for bigger items.


​If they have it all handed on a plate now, what have they got to look forward to when they're older?


"We don't make a big deal of branded goods, or having the latest gadgets. If you grow up around parents who are always talking about buying designer clothes and handbags, you're surely going to end up thinking that stuff is important. If we do buy something expensive it's for ourselves and not to show off to others and make statements. I hope my kids 'get that' as it's quite liberating."

Teaching your children about the value of money depends on their ages. A five year old has to learn that their fifty pence pocket money lasts for the week. When they are older, saving to buy presents for their family at Christmas or birthdays teaches budgeting and planning ahead.

Lending them some money until pay day, once they have a part time job may be fine - but at some point they have to learn that 'I want' doesn't always mean instant gratification when the price is expensive credit and the worry of being able to pay it back.

Allowing your child to have what they want, when they want it might seem to be showing them love- but if they never learnt to wait, or save, or avoid debt- is that teaching them how to handle money?

What are you teaching your child about money?

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