14 Mar 2017
Mark Twain once said that “the secret to getting ahead is getting started.” That’s especially true when it comes to teaching your kids about money. The earlier your kids learn how to save and be responsible with money – the better it will be for you in the long run.
Teaching them the joys of money management will help when the teenage years come along too – as they won’t be swindling change from you left right and centre. Well, let’s hope not...
It’s not about being a spoilsport – but just about showing kids the value of money and planning for the future. It’s about teaching them the benefits of saving and showing them all the things money pays for – like their future college fund.
While it might be hard to imagine your five-year-old who has just completed a self-portrait on your kitchen wall in permanent marker ever making it to college – you can convince them to save for art school!
It’s not a daunting task – it’s just about instilling good habits and sensible management. Your kids will thank you in the future – that much is guaranteed. Here are our top tips for passing on your wealth of knowledge!
Start a regular pocket money fund
It might seem counterproductive to start giving your child pocket money when they’re really young. They couldn’t spend it all in the one shop if they tried! But once your child has mastered basic maths skills (usually around the ages of six or seven) – they are ready for pocket money.
This is where you will need to show good financial management yourself – they need to get the same amount every week to teach them how to budget and plan their money.
Psychologist Joanna Fortune says that “one of the most valuable tools parents have is pocket money. Once a child hits seven they can start getting pocket money. But no matter how much a child gets, they should always be taught to put aside 10 per cent.”
Psychologists have shown that kids can start learning about money at the age of two – and have a fairly firm grasp of the concept by the age of five. So it’s never too early to start teaching them financial lessons, even if they don’t need money just yet.
Even at the age of two or three you can read them books like Bunny Money (where two bunnies try to make their money last to buy some vampire teeth for their grandmother – the present all grannies really want) which teach subtle, but valuable lessons.
Save for their education early on
It’s important to start planning for your child’s education as early as possible, and to involve them in the learning process of long term saving, too. When they reach communion or confirmation age, they will have grasped an understanding of the time and regular commitment involved in long term saving – they might even want to give their own contribution to their pot!
A handy tip is to have three jars – one for saving, one for a medium-term goal (a football jersey or a gadget) and one for weekly spending. You can also help them along by opening a mini-saver account to help their money grow.
Teach them some basic saving sums
Educating your kids about saving is one of the most important lessons you can ever teach them. If they’ve grasped the basics of addition and subtraction, give it a go and move them on to interest rates– just don’t put them asleep! Use fun examples they can really relate to.
If your five-year-old child saves €2 per week – that’s €104 per year. How many Pokémon cards or ice-creams can they buy with this? This might widen their eyes and get them saving their cents in no time.
If they invested that in an account that paid 5% interest, by the time they are Daddy’s age (35) they’d have €449 and they’d have €1942 by the time they are the same age as Granny (65).
Let them make their own mistakes... just the once!
You can only learn buyer’s remorse after you have made a silly decision. So by all means, advise your child – but if they are bull-headed about buying something you know they will get sick of within a week, then let them buy it.
So even though you know that bag of elastic bands in the shape of animals will linger at the back of a drawer until the kid goes to college – let them make that mistake this one time.
Then once they have stopped using their new purchase – go over the choices they made and how to improve in the future and teach them how to curb their impulsive tendencies.
Just don’t tell them about all your own abandoned gym gear lurking at the back of your closet.
Encourage them to sell their old toys
Warren Buffet is currently the world’s third-richest person with a net worth of well over €50 billion. He reckons that “the age you started your first business impacts how successful you are later in life.”
While this might not be the ultimate gauge for financial success (let’s hope not anyway!), there’s really nothing that will teach them about profit than experiencing it first-hand.
He has backed this up by starting a cartoon series called the Secret Millionaires Club which he, bizarrely, provides the voiceover for. The series teaches kids the lessons of how to run their own businesses and manage their money.
So why not encourage your child to sell their old toys when they’re younger, or get a job mowing lawns or delivering leaflets when they’re that bit older? Or maybe even developing their own app if they are technical?
If you are following anyone’s advice when it comes to money – Warren Buffet is probably not a bad place to start.
Book a Free Financial Review Today
If your child does take Warren Buffet’s advice to heart – then the EBS Children’s Saving Account is perfect – they’ll get a €20 bonus once they save €50 for six months – as well as a piggy bank and regular saver’s certificates so they can manage their portfolio.
Why not book your free financial review with EBS now, and see what you can learn about managing your future – and your children’s future too?
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