(This is a guest post by John Ellmore)
As a child, it can seem parents are a source of unlimited money.
After all, they pay for the home, food, clothes, and of course taxes, but most kids will be unaware of how much these all actually cost until they are considerably older.
Many parents may struggle to talk about money with their child, especially as finances can often be a source of stress for adults let alone a 10-year-old!
It is important they learn about managing their money effectively as it is never too early to teach children about money, and it can even be fun with these simple steps….
There are numerous games for kids of all ages that can help them become familiar with money. From simple shopping board games where children can purchase items and learn how to count out coins, to more complex ones involving properties and investing like Monopoly, games are an invaluable way to learn about managing money.
Playing make-believe shops with parents, siblings, or friends can also get children more comfortable with handling money and learning about the value of goods.
One of the good things about games is that parents can simplify them or make them more challenging, according to the ability of each child. They also provide a relaxed environment where kids can take their time to count out the money and learn at their own pace, at the same time as hopefully having fun!
Introduce them to virtual money
With payments on debit cards overtaking cash payments for the first time in 2017, according to figures, it is increasingly important to teach children about virtual payments. Without teaching children about this side of money, it can be easy for them to assume they can buy anything with, quite literally, a tap of a card or click of a button.
This is particularly evident with in-app and in-game purchases, with there being numerous stories of children racking up a huge bill on their parent’s cards from buying upgrades and other items. As they don’t see physical money changing hands, it can be hard for them to understand how much they are actually spending.
Although a piggybank is useful for kids to see the physical money they have, there are more effective ways to educate them about virtual money. Bankaroo provides an engaging, visual platform to help children understand the value of ‘invisible money’ and learn how to manage it effectively.
Bankaroo featured in Knowyourmoney’s shortlist of top finance apps for kids. Apps can teach kids about different aspects of money, including budgeting, spending, and saving towards financial goals, which can help to prepare them for ‘the real world’ when they get their own bank account and start earning.
Encourage children to use their own money
Whether you give them pocket money or make them earn money from household chores, the best way to teach kids about money is to let them manage and use it themselves. With the support of a parent or guardian, letting a child make their own choices about their money will teach them to take responsibility for their finances.
If they want to spend all their monthly income on a specific game, a parent may think that’s not a wise thing to do. However, if the child buys the game and has no money left to buy anything else for the rest of the month, next time they may think more carefully about how much they really want (or need) that item!
Learning from experience is a simple way for children to get to grips with money, and one of the quickest ways for them to understand the value of certain things.
Talk to your child
Perhaps most importantly, it’s beneficial to start talking to children early about money and explaining the decisions you make. If they ask you to buy something, or they want an expensive item because their friend has it, don’t just say “no” or “we can’t afford it” or “it’s a waste of money”. This doesn’t make the child understand why you can’t afford the item because, to them, it may not be a waste of cash and would be well worth the money!
If, however, a parent explained that if they bought that latest phone they wouldn’t have the money for the planned family trip at the weekend, it might make the child consider the value of different items and if they are really worth the expense.
Even talking about money with a young child when you do food shopping can help them learn some skills. Discussing whether a 6 pack of baked beans is better value than buying a single can may not be an obvious topic of conversation, but it will get the child thinking about how they can spend their money wisely.
Creating a dialogue about money when children are young can also be beneficial as they grow older. When they have to make more significant financial decisions, about savings or mortgages, for example, they may feel more at ease asking for help and advice instead of trying to hide their worries or troubles from everyone.