The summer holidays are here and you may be wondering how you are going to keep your children or grandchildren entertained until they go back to school.
You will likely be spending a lot more time with them taking trips together, going on family days out, or just relaxing at home.
While you have this quality time with them, you have a great opportunity to teach them some of the important financial lessons that they don’t necessarily get in the classroom.
Indeed, the Money and Pensions Service reports that only 47% of children receive meaningful financial education at school. Additionally, those who do learn about money are more confident about managing money and using a bank account when they get older.
So, if you can teach them some core financial concepts, they may find it easier to achieve and maintain financial security as adults.
Read on to learn why financial education is so important, and some sound financial lessons you can teach your children or grandchildren this summer.
5.4 million UK children do not have the financial skills they will need in adulthood
You may think that children should start learning about money when they reach their teenage years and have more independence. However, if you wait until they are older, you could miss out on crucial opportunities to shape their relationship with money.
According to Money Helper, children begin forming attitudes and building habits around money from the age of five. As such, it is important that you guide these attitudes and help them develop a good relationship with money from an early age.
Unfortunately, as the Money and Pensions Service found, financial education is lacking in many places and that means 5.4 million UK children do not have the financial skills they need in adulthood.
As a result, they may develop negative habits that are difficult to break as they get older, and this can make it harder for them to remain financially stable and meet their goals.
The good news is, there are some excellent financial lessons you can teach your child or grandchild while you are enjoying your time with them during the summer holidays.
5 sound financial lessons you can teach your children or grandchildren this summer
1. Budgeting
Budgeting is the foundation of good money management. One of the easiest ways to teach your child how to budget is to give them regular pocket money.
Then, you can let them make decisions about how they spend their money and teach the importance of budgeting. During the summer, family days out are the perfect opportunity for this.
For example, if you take them to the beach for the day, they may want to spend money on ice creams, arcade machines, or toys from a gift shop. You can explain to them that they need to consider what they want to buy and avoid spending all their money on one thing at the start of the day, or they may miss out later.
While this is a simple example, it teaches the importance of thinking ahead about what they may want or need to buy in the future and dividing their money accordingly.
Once they are confident budgeting money over the course of a day, you could give them pocket money for the week and ask them to budget over a longer period. Older children may even be able to budget monthly pocket money.
2. Saving
Saving is another crucial financial habit and the earlier you can encourage children to think about it, the better.
If your child or grandchild wants to purchase something more expensive like a certain toy or video game, help them save their pocket money until they can afford it. You can help them to create a budget, so they save a portion of their pocket money and spend the rest. Then, track how much they are saving together so they can see their progress.
You could even pay them a small amount of interest – £1 for each £5 they save, for example – to encourage them to keep contributing to their savings.
It may also be a good idea to explain to them that you save money for things. For example, if you are going on a family holiday, explain that you can pay for this because you have set money aside for it in the past.
3. Earning money
There are lots of jobs that you may need to do around the home in the summer including gardening or washing the car, for example.
Getting your children involved and offering to pay them to help with some of these jobs can be an effective way to teach them about earning money.
This could also encourage a different attitude towards money as they may value it more if they have earned it.
4. Basic purchases and money handling
Your child or grandchild also needs to learn about the practicalities of making purchases and handling their money.
Fortunately, there are lots of opportunities to teach this over the summer while you are out with them. For example, it may be useful to let them make purchases and keep hold of their own money. This helps them learn the value of different coins and the importance of keeping their money safe.
If they are physically handing over the money and receiving change, they learn to consider and understand the cost of different items too.
Additionally, you may want to help older children to open a bank account and encourage them to pay into it and track how much is in there. They can then learn to make purchases using a card instead of cash.
5. The difference between needs and wants
Understanding the difference between needs and wants helps you live within your means and use credit responsibly.
As such, it can be one of the most important financial concepts to learn because, once children can grasp this, they may be far less likely to get into financial difficulty.
You can help your child or grandchild understand this by explaining that things like food or clothes are essentials that you need to buy, while toys or days out with the family are “wants”.
It is particularly important to explain that you can spend money on enjoyable things like family holidays or toys because you budget and ensure that you take care of your needs first, and then set money aside for wants.
Get in touch
Good financial education can help your child or grandchild to be more financially secure as they get older. If you would like to explore more ways to support your family, we are here to help.
Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.
“Black Swan Financial Planning was established in 2000, and since then became one of the top independent financial adviser firms in the UK.”
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