How to help your child form a savings habit from the start
First Communion can mean a cash windfall for children, so now is a good time to teach them how to manage it, says Sinead Ryan
If thousands of Euro was suddenly handed to you, what would you spend it on? A holiday? Paying off the bills? It would be a nice dilemma. Over the next few weeks, it may feel like that for lots of Catholic children. Their First Communion can mean a windfall. Research has shown that the average child receives €546 on the day with over 20pc getting more than €800. Parents, on the other hand, will have shelled out similar amounts on clothes, bouncy castles, food and drink!
Leaving aside the religious part of the day (and it has to be said the Church is at pains every year to remind parents and children that it's not all about the money, while schools plead for temperance in the same way), there's no doubt that this may be your eight-year-old's first introduction to serious funds.
Laura Erskine of Mummypages.com says: "The significant amount of money gifted to children at Holy Communion time provides a great teaching opportunity. However it can also be a minefield with questions as to whether to encourage your child to save or allow them to spend their Communion lump sum. Most of our parents agree that saving some and spending some is the best approach."
Research shows that most children spend 25pc of their Communion money, but one in 10 spends 75pc of it immediately, while 34pc save it all.
Frank Conway, who runs the MoneyWhizz programme in schools supported by Bank of Ireland says: "By age seven, kids begin to form lifelong money habits and early intervention is critical if they want to grow up with good ones. But parents themselves often lack money skills to do with saving, credit and risk."
Conway adds that understanding the difference between needs and wants is the first step. "Simply put, we should spend 50pc of our money on things we need, 30pc on things we want, with 20pc allocated to savings."
A money box, post office account or other simple arrangement is a great start, even for kids under seven. Crucially though, have that talk with your child before the cash lands. They may be overwhelmed by it, and not really understand the difference between €50 and €500 in terms of the value. It's never too early to start saving, either. Under Seven
l A jar or piggybank in their room to stack up coins is a great idea. Decide when it's to be cracked open (summer holidays maybe) and add an incentive by matching what they save. Put a picture of the goal on the front so they stay focussed.
l A 'job's chart' can help them earn more money. Children should do some simple chores for free, but extras earn money - decide between you what these might be.
Seven to age 12
l Pay pocket money, by age, if you can afford it (eg €10 for 10-year-old) on the same day every week. Never bail them out once it's spent.
l Agree the amount that must be saved and how much can be spent now and on what. l Banks reserve their best interest rates for children (see table). Now's a good time to open an account there, or in the post office.
l DIRT is payable on savings, so it's also a good time to discuss what tax is too.
l They may now be eligible for an ATM card. It's a great opportunity to talk about online security and overdrafts. There are apps to help them stay in control. l Teens should have specific savings goals; new runners, a bike, or maybe even the beginnings of a college fund. l Students don't pay transaction fees, so banking is free, but once they're finished college, they'll hit charges, so comparing banks becomes important.