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Tuesday 25 October 2016

Take control of First Communion bonanza

Leaving Communion cash in a child's hands without any ground rules is reckless

Published 22/05/2016 | 02:30

'Teach your children that life, like Communion, is not all about money'
'Teach your children that life, like Communion, is not all about money'

First Holy Communion season is in full swing, and the cash bonanza earned by many children on the day could sow the seeds of money problems down the line - unless their parents step in. One in five children pockets more than €1,000 in cash on the day, while the average child makes around €300, according to "To leave that amount of money in a young child's hands without offering parental guidance is reckless," said Joanna Fortune, a psychotherapist with the parent-child relationship clinic, Solamh. "It's very important that there are parental boundaries around Communion money."

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Fortune believes that Communion money can be used as a tool to help children learn the value of - and how to manage - money. So how exactly can you use it to do just that?

Save a third of it

"Communion is a good opportunity to begin your child's savings," said Fortune. "Teaching them to save up for something allows them to understand the power of saving - and delayed gratification."

The ability to delay gratification - that is, to resist the temptation of an immediate reward and wait for a later (and usually, bigger) one - is considered by many to be an essential life skill. Some experts believe that a child will be better with money later on in life if he can delay gratification. Savings is clearly one way to teach your child that concept.

If you haven't done so already, bring your child to your local bank, credit union or post office, and get them to open their own savings account. The exact portion of their Communion money to be saved into that account should then be decided. Getting your child to save a third of their Communion money is a good start.

Advising your child to lock all of their Communion money into a savings account until they're 21 is probably a mistake. Inflation will eat into the value of that money over time - so its purchasing power is most likely stronger today than it will be in 2030.

Don't let your child forget about his savings account once Communion becomes a distant memory. Encourage him to save some of his pocket money into the account each week. The average amount of pocket money given to a child in primary school is around €10 a week, according to Money Doctor, John Lowe. "At least €3 of this should be saved so that when things like Christmas or family birthdays come up, the child has the money to buy those presents," said Lowe. "There is nothing like independence encouraged from a young age."

Spend some of it - wisely

Allow your child to enjoy some of their Communion money - and to buy something which puts a smile on their face. Don't give your child free rein to buy anything though.

Some children get their first smartphone or tablet when they're as young as eight. So a request to use one's Communion money to buy such a device may well be on the table already. "Just because your child can afford a smartphone or tablet doesn't mean he or she should have it - without your consent," said Fortune. "If you think your child is too young for such a device, don't allow it."

Give some of it

"There's a joy in giving, and Communion money can teach your child that," said Fortune. "In my family, the person who made their Communion always bought something for their siblings - as well as for themselves."

Teach them the value of it

Give your child an understanding of exactly how much their cash bonanza could buy, how easily it could be gobbled up by boring day-to-day costs - and how hard an adult would have to work to earn that money.

"When you bring your child on your weekly shopping, point out the total amount spent when at the till," said Lowe. "If your child has made €300 on his Communion, it might register as enough to buy two weeks' family shopping."

Although paying by card is convenient and (usually) cheaper than cash, it is hard for children to grasp the value of money if they see you paying for everything by card. Use cash to pay for the weekly shop - or get your child to pay for a treat with cash. They are less likely to believe that you - or your bank card - are an infinite source of funds if they see a sum of money disappearing after you pay for something.

Explaining how long it normally takes to earn the money your child made on Communion Day can be difficult. "A good place to start is by describing the jobs you and others in your family do every day," said Marah Curtin, head of client engagement with Davy. "It's also good to point out workers your child sees or interacts with on a regular basis - their teacher, the taxi driver, the clerk at the grocery store - and talk about how they get paid (salary paid monthly, wages and tips, by the job, by the hour) and who pays them."

Should your child grasp this concept, it can help them develop a work ethic very early on in life. Children need to understand that money must be earned - and that usually, the harder you work, the more you earn.

"You don't want to discuss your own personal finances with young children as it's too overwhelming for them," said Fortune. "But it's important that they learn that if there's something coming up, you need to work towards it. They also need to understand and accept that there will be some weeks when you - or they - can't afford things."

Although you shouldn't weigh your children down with your own financial woes, resist the temptation to portray your finances in a rosy way - particularly if this is not the case.

Don't leave it until Communion Day

"Children as young as three can grasp basic money concepts, like saving, with a little help," said Curtin. So start teaching your children about money from a young age - and build on those lessons as they grow older.

A 'money farm' is a good way to teach a three-year-old about money, according to Frank Conway, founder of the financial literacy website, "Create a 'money farm' comprising three different coloured containers - green for 'saving', red for 'spending' and gold for 'sharing'," said Conway. "Every time your child receives money, divide the money equally among the jars. Use the spending jar for small purchases, like sweets or other 'desirables'. Money in the sharing jar can be decided on as needed and the saving jar is for more expensive items."

You should also get your three-year-old to set a savings goal, such as for the purchase of a game or a specific toy - so that they can put the lessons learned on the money farm into action, advised Conway.

Pocket money is a good way to teach your children about money - regardless of their age. Set some ground rules on how they should manage that money - and what it should be spent on. However, give your child the freedom to make mistakes with it too. Better they learn the repercussions of blowing all their money on something at a young age than when they're older and have more at stake when doing so.

Many parents take the view that pocket money should be earned - rather than simply given. So don't be afraid to ask your children to do chores around the house in return for pocket money.

Giving your teenager a set amount of pocket money each week to cover things like mobile phone bills or social outings is a good way for them to learn the basics of budgeting. A part-time job can be a useful way for a teenager to learn about money - as long as it doesn't impinge too much on their studies. Earning your own money gives you a much greater understanding of how you accumulate it.

Don't put money on a pedestal

Communion, like many other religious ceremonies, has become more commercial over the years. Teach your children that life, like Communion, is not all about money

"Teaching children that money is a means to an end and not the be all and end all of everything is important," said Lowe. "You don't want your child growing up with money as their number one motivator."

Ensure they know how to manage it though.

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