Thursday, 19 December 2013



Understanding and managing our finances is an important skill for all of us.  "Save your money and your money will save you" - Jamaican proverb.  At school your child will complete money sums and word problems as an exercise but not necessarily relate their learning to the real world. Children may observe you paying for things with a credit Xcard or  via the internet without actually realising that you have first had to earn that money and that you have used money to pay for the item.  The concept that money is easily available for all may also be reinforced when they witness you withdrawing money from an ATM.  However at home you can develop your child's understanding of money in general as well  as an understanding of saving, spending and budgeting in the real world so that they are money smart throughout their lives.

Discuss what money is with young children explaining how we need it to buy things and how it can be earned. Tell them about your employment, current and past.  You may recall how you completed chores to earn money as a child.  When you are out and about, point out people who are working e.g police, gardeners, builders, etc. Let children know that things cost money, sometimes a little and sometimes a lot, so that when buy something you have to consider this.  Play board games with your child that involve money and spending. 

With your child discuss the difference between need and want.  Share with them the things that all living things need to survive: water, food, air, shelter and warm.  (Older children will be more aware that not all children have these things and may want to raise money for charities  either independently or at school and organisations such Scouts or
Girl Guides).  Share with them the things that money cannot buy; a loving family, a sunny day, friendship, etc.  Write a shopping list with your child, explaining that there are some things that are essential and other things that are not.  For example, you might say, "We need to buy milk for the breakfast cereals and for you to drink because it helps you grow strong.  We are buying cake today because your friend is coming for tea and it will be a tasty treat for you both." 

Shopping with your child is a good way to encourage an understanding of spending and budgeting with your child.  Involve your child with the shopping, encouraging them to compare prices, consider bargains and special offers and explain your reasoning behind the choices you make.  For example, you may not  choose to buy a two for three offer on  punnets of strawberries because you know that they might not all be eaten before they go rotten.  Many children enjoy playing shop.  Up cycle empty food packets and encourage children to price their items to sell or create their own special offers to tempt their customers to buy.  If possible let children use real money for this, you could use foreign coins from a recent holiday abroad.  Some children may want to consider using credit cards which they could design and colour themselves from cardboard so that they can begin to understand how credit cards replace money and how they work.

I have previously mentioned how some young children may not understand how credit cards and ATMs work or have very little knowledge of banking.  Explain how banks work and how credit cards are a different way of spending money.  Some children may enjoy playing banks in the same way as they play shops.  Some banks and building societies have accounts specifically designed for children.  Discuss how banks and building societies can support you to save money for an expensive item and reward you for using their facilities to do so by paying you interest.  At the same time discuss how banks may offer you a loan for buying very expensive things such as a house and how you have to pay them interest.  When viewing money loaning adverts on TV or in magazines encourage children to note the interest rate.  Children are often surprised about how much they have to pay back on a  loan.  This helps them to understand that a taking out a loan has to be a very deliberate and considered choice.

Internet shopping is increasingly a popular way to shop.  Again explain to younger children how this works.  With older children discuss how some offers look very tempting; almost to good to be true.  Look at these offers, pointing out the hidden extras in the small print.  Whilst doing this  reinforce the importance of being safe on the Internet.  Explain that they should not give out any personal details and that there are companies and people who will use their details to defraud them.  This would also be a good opportunity to discuss with your children about not chatting on line with strangers, giving any details about themselves or agreeing to meet anyone they have chatted with.  Remind them that they should tell you if they feel threatened when chat rooms or if anyone asks about them or encourages them to meet them. 

You may decide to give your child pocket money which they could earn through completing chores at home so that they can experience having their own money to spend in addition to any that they may receive for birthdays, etc.  If your child does have their own money, encourage them to divide it into three - savings, spending money and money to share.  Allow them to make their own mistakes.  So if they want to buy the latest console game but keep spending their money on sweets keep encouraging them to make a better choice.  If possible do not 'bail' them out or if you do consider charging them ' interest' on any loans that you make.  A strategy to encourage your child to save is for you to match their savings.  Again encourage children to research a and compare prices and offers on the item that they are saving for. 

Encourage your child to be enterprising so that they can earn money for themselves or others.  Obviously you need to emphasise the need for them to keep themselves safe.  The Scout Association no longer encourages its members to go door to door offering to do chores for the occupants - Bob a Job - as it recognises the dangers to children doing this. Recently I saw two teenagers selling lemonade to the spectators as they walked passed their drive.  In the same way, your children could sell vegetables that they have grown or cakes that they have baked.  They may decide to leave their goods out on a table at the end of the drive so people can buy them, trusting that the buyer will put their money in the bucket provided.  Certainly, if some one does not pay or even takes their money it is a hard, yet essential, lesson to learn that there are a few people who are not honest.  As I have previously mentioned above, Many schools encourage their students  to raise money for charities through a variety of activities.  Some schools are very good at letting the children organise this for themselves, developing skills of collaboration, reflection, resourcefulness and adaptability in the process. The teachers are there in an advisory role to support those children.  In my experience the children who do participate in such fund raising events have a great deal of fun and feel a huge sense of pride in their achievements. 

You can encourage your child to budget and manage their finances by modelling how you do this.  You can draw a circle to create a pie chart to roughly estimate the percentage of your income you spend on household bills, food, your child, how much you are saving.  You may also wish to share one of your statements with your child explaining so that they understand that income and outcome.  The following strategy may support to be money smart and encourage them to make good choices with their money:

Don't let your money melt away - SPLIT IT!

Save and set limits
Live within your means
Impulse buying is bad
Track your expenses

You may wish to plan a party or even a day out with your children with a given budget so that together you can research and make decisions.  These are obviously real life situations but you can also encourage children to research and plan an event within a set budget in an imaginary situation.  For example, you might give your child a copy of a store catalogue and set an imaginary scenario that they have been asked to spend a set amount on equipment for the  local playground.  What would they buy?  How many of each product should they get?  Can they take advantage of any offers etc?

These are just a few things that you can do to encourage your child to be money smart. Whilst helping children to understand that money does " make the world go round" it is also important to develop the responsibility of managing their money sensibly;  encouraging them to reflect on their needs and wants and that there are things that money cannot buy.  "Do not educate your child to be rich.  Educate him to be happy so when he grows up he'll know the value of things, not the price." Anon.

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