Deciding what to do with their money when they’re young prepares kids for making bigger, more important decisions when they get older
With the announcement of the Budget yesterday, you may have money on your mind. Today’s paper has features about how some of the Budget measures might impact you and your family. If this is a talking point in your family, then extend it to include your children. While you don’t need to speak to them about the intricacies of your family finances, dealing with money is a great learning arena for children and teenagers.
Having and spending money allows children to make decisions. Early on those decisions will be about small and relatively safe or benign things (like whether to buy a bar of chocolate or a packet of sweets). Depending on the choice they make, they may feel delighted or disappointed, and both outcomes provide you, as a parent, with the opportunity to help them review and reflect on their decision.
It is this review which helps them to learn about how they came to the decision, what they may have needed to additionally consider, how to avoid repeating mistakes and so on. Making decisions about small things when they are young prepares them for bigger, more important decisions when they get older.
Giving children the power to spend their own money also helps them to learn about responsibility. They need to learn to keep an eye on their balance, knowing how much they have and how much they will have after they spend some. They also need to become responsible for not wasting their money, learning to spend it wisely so that it gets them things they need before things they want.
Once children start spending money, they quickly realise that some things cost more than they have to spend. This is a good thing. Learning to cope with disappointment can be just the motivator required to encourage our children to work, save and to really enjoy the fruits of their labour. Don’t be tempted to lend your child money, rather take the opportunity to teach them how to put aside money, saving it steadily until they have gathered enough to be able to make the purchase they want. This whole process will encourage them to live within their means, reducing the likelihood that they will become dependent on credit when they are older.
As well as learning to be responsible for living within their means, they learn about delaying their gratification. For children to learn that good things come to those who wait, they need to be confident that the waiting is worthwhile. So, seeing their money accumulate in a jar (or in an account, perhaps as a subsidiary to your account), then being able to convert that into the thing they really need or want is a rewarding experience.
It is only when children have their own money that they can discover the value of money. Additional chores within the family may be one such way that they discover that their time and effort can have a value, since it can be used to get something that they want.
Whether as pocket money from you, a gift, or money earned, you need to realise that it has become their money and this is a chance to experiment with trust. You must trust they will be wise; they must trust that you will give them the independence they need.
If they are making mistakes, this is your opportunity to discuss, reflect and help them learn how to avoid those mistakes the next time. However, unless they have it, to be able to make mistakes, if necessary, they cannot learn.
Once children and teenagers have money to spend you also have an opportunity to discuss bigger social issues like equality, justice, exploitation and so on, since the purchases they may want to make could cost more (because of Brexit, or because it is a designer label, for example) or may perpetuate social injustice, or child labour exploitation.
You may want to help them to realise that things like branded items cost more without, perhaps, delivering more value. This is not to say that you shouldn’t let your child buy labelled goods, but you can give them the amount you feel is wise to spend on new runners. Then, if they want more expensive runners they can set aside more of their own money for the balance.
Negotiating with your child about the money they have available to spend gives you so much opportunity to teach them your central values about what money means, and how we need to approach it. You can talk about things you may value such as quality over quantity, or creating greater social equity through sharing, gifting or donating to others who don’t have the same as your child has.
Teaching children to manage their money may help them to avoid becoming the adult who knows the cost of everything, but the value of nothing.