This article, the second in a three-part series, continues my effort to help parents prepare children for their financial future.
In the first blog we discussed the importance of banking for children with helpful tips and guidelines parents can implement to get their kids prepared.
These two recent articles we break down their financial learning into three age groups.
Children ages 3 to 7, 8 to 15 and teenagers 16 and above. In this 2nd article we target ages 3 to 7 and 8 to 15. In part 3 we delve into age 16 and older.
We look at;
- Developing good money habits
- Savings and techniques to save
- Budgeting foundation
- Their credit report (let’s start right)
- Investing with tips and helpful guidelines
- Money apps and board games for children
- Book recommendations
Children age 3 to 7
Introducing finance talk with your child at this age range is a significant starting point. Children in this age bracket won’t understand the value of money; but they can learn the very basics of cash management.
One of the best savings concept invented is the Piggy Bank. We go one step further and recommend the use of a SMALL clear / see through piggy bank or jar. The aim is to teach our children to save and also show the jar getting fuller and heavier when they are putting coins or notes into the jar.
If this is their first attempt at using this method, we want to fill this jar in a short time frame. Children learn best seeing something grow.
An excellent way to use their first piggy bank savings is to give them a treat from this fund. We prefer this early attempt at savings to be achievable and rewardable. The key is to motivate them to save. This method is ideal for kids ages 3 and 4.
Planning, budgeting and giving for beginners
For ages 5 and older we can introduce another one or two jars/piggy banks. These two additional jars will be for spending and giving. We are now getting them to think more about money planning and what they want to achieve.
1) Savings Jar
Discuss with your kids what they will use this fund for. It could be a one month, six months or longer goal for an item, etc. This jar is used to teach delayed gratification to your child. An important learning aim to financial success as an adult.
2) Spending Jar
As mums and dads, this is where we are allowing our young ones the flexibility to determine how they wish to spend this cash. The fewer restrictions, the better.
3) Giving Jar
I propose using the funds in this jar for a good cause, church, charity or something or someone in need. In my children’s school they have a few collections a year for charity; an agreeable time to use the money from this jar.
With this three jar system we are teaching them different value systems and techniques; self control, budgeting, delayed gratification, charitable giving and goal setting.
Please note this jar system are recommendations to assist their learning; you need not implement all three jars. If you implement a savings jar on its own is a great habit to instill and will teach them many lessons.
Start talking banking with these little steps – Pointing out the different banks/ ATM’s/ Cash machines in your hometown will allow your youngsters to recognise these landmarks. Why they are there and what purposes they serve are excellent discussion points to have with your children.
You can include financial concepts into your child’s imaginary games, playing pretend food shopping or restaurant. Kids get excited about using pretend money or playing with coins and notes as a cashier. A toy cash machine does the trick.
Remember, you can recycle your empty cereal boxes and other child friendly kitchen items. These simple games will teach your kids the basics of commerce through an exchange of pretend money for goods and services.
A superb way to bring alive finances, engaging our little one’s imagination through storytelling. Here are a list of wonderful children’s money books–
1) Daisy Books–recommended by Moneywise magazine ages 5–7 -A series of books that teach kids’ about the realities of wealth and that it doesn’t grow on trees.
2) The Financial Fairytales: learning before earning series ages 5–11 recommended by Moneywise. The Financial Fairy Tales series of children’s books, inspirational stories which share money values, tools and techniques with children.
3) Curious George Saves his pennies–recommended by rooster money ages 3–5
When George decides to save up for that special red train in the toy store, he doesn’t realize how long it will take—or how hard he must work for his money. But when the time arrives to take his very full piggy bank to the toy store—surprise!—George loses it. Can this day, and George’s hard-won earnings, be saved?
4) The Little Investor – I suggest this book and bought it for my little ones who loved it. Simple and to the point. They will learn about money and where it comes from, different currencies, etc. The pictures are educational, fun and engaging.
A key way to engage our little ones. Older family members also enjoy these activities. It’s amazing how everyone gets excited playing these games. Here are a few that fits within our age range.
1) Money Bags–ideal ages 3–8
Children earn money by completing the household chores detailed on the eye-catching board and get paid for them–which is just how it should be done in real life! Players have to choose the right coins to make up the payment, so it also teaches them how to recognise coins and work out their money. (Amazon excerpt)
2) Pop to the shops ideal ages 4–8
In this game children take on the roles of both shopper and shopkeeper. They move around a village buying items from different shops, depending on the card they pick up and the roll of the dice. Players need to work out the correct coins to pay and how to give change, too. You can even encourage the art of polite conversation between shopper and shopkeeper! (Amazon excerpt)
To complete youngsters in this age range 3 to 7, I suggest using physical cash (money) to teach them money management; we want to solidify these beginner habits before moving them onto more complicated finance methods.
Children age 8 to 15
At this age we can introduce more complex methods to their finance management, introducing them to digital cash and online banking. It’s also a good age range for parents to implement an allowance system.
An allowance will go a long way in helping your youngster develop a good financial mindset. They can allocate this money into their cash jars or deposit it into their own bank account.
Kids as young as age 7 can register for a child friendly bank account with online access in the UK. Online banking access provides an opportunity for us parents to train our young ones early so that when they are older, they are more responsible with their own bank accounts.
As mums & dads we can set times with our kids to go over their bank statement’s whether it is paper based or online. Whatever amount we give them a month in cash deposit or bank transfers, our youngster will see this banking activity for the month. They will learn how to recognise and account for this.
When visiting the bank, we should encourage our child to ask the bank representative questions about their bank account, etc. Young ones will grow in confidence speaking to a bank staff. Many studies over the years have shown that young adults find banking and finance intimidating. It is important we teach them at this early age, it won’t seem daunting when they are responsible for their funds.
The best way to teach children about finance is by modelling the behaviour we wish youngsters to pick up. As an example, I take my kids with me to the bank, sometimes within reason I show them when I do online banking and shopping. We have an open conversation around money and spending.
The more we get children involved in our everyday routines, the more they learn and understand about handling cash. This is within reason and some money aspects may not be appropriate for their age. Bear this in mind.
I use food shopping to teach my offsprings this technique. When I am not doing online food shopping, we go to the physical shop with a list and cash.
My eight-year-old son oversees the shopping, including scanning and paying at the checkout with the younger sibling assisting him (I use cash). Kids enjoy doing this simple activity.
I propose that you start this process with a brief shopping list and with time increase their capacity to a bigger list. Parents, let’s not stress ourselves, start simple.
Additional tips. Let your child check out the online supermarket to look at the cost per item and make a price list before going to the physical store. The goal is to encourage them to set a realistic and achievable budget, including their treats.
For our older ones 10 years and above, we can teach them comparison shopping. For example, getting them to compare generic brands verses a brand name item. They can try out a generic can of corn and see how it compares to a brand name. As we continue these exercises, our offsprings will learn key principles that will help them realise a brand name item does not always equate to better value.
Parents I would bring to your awareness branding & marketing. When our kids hit the teenage years branding, fashion, social media and peer influences increase. The earlier we show them about the power of branding and advertising the better. Hopefully, when equipped with the right information, our children can make excellent choices (you can read my blog post ‘The rise of the Consumer’ for more info on branding and commerce).
Let us also be mindful as parents our behaviour and attitude towards branding and spending can influence our offspring’s behaviour. They are watching us.
EBay/Car Boot Sale
A simple strategy to train your child to earn money? We can use this occasion to have our children help us do an inventory; things we can give to charity, disposable items and saleable objects. With supervision, our youngsters can surprise us by handling some of this responsibility. Children learn how to price and sell items.
These simple budgeting exercises teach kids many life skills; self restraint, budgeting, decision making, planning, food shopping and many more.
A child’s teen years are a suitable starting place to show them about simple investing. If your youngster wants to learn and already understand the basics of money management, then parents it is our responsibility to help guide them. I know this can be a minefield, so I recommend caution when approaching this topic.
Below we have included a list of books, board games and apps that you may find useful for this age range 8 to 15–teaching them a broad spectrum of money and investing methods.
1) Payday board game – PAY DAY sees you invest, borrow and spend your money to make your fortunes. You will Countdown to PAY DAY as you face the highs and lows of the calendar month. You will learn basic money management, including how to earn and save money.
The classic game of money management is suitable for ages 8+ and 2-4 players
2) Monopoly – An enjoyable game to learn about money management, basic maths skills, investing in property, negotiating skills, experiencing financial difficulties and dealing with sudden emergencies such as taxes. We learn about financial and investment choices and situations and their impact.
3) The Game of Life – You win the game by accumulating the largest net worthwhile choosing paths that simulate real-life choices, such as family size and career. Number and Ages of Players: You can play The Game of Life with two to six players, suitable for players ages nine and older. They learn about education and career choices, losing a job with its consequences and investing.
1) Go Henry–A popular money and savings app targeted to children ages 6+. Parents and children can set savings goals, see what they spend, and there is a contactless pre-paid card and app for both parents and kids.
It costs £2.99 per child per month. There are additional charges.
2) Savings Spree–a finance educational app that has activities to teach your children good money habits. The kids can earn pretend money for their sensible decisions or lose it for awful choices. This app is a Winner of a Parents’ Choice Award. Your child learns about bank balances, spending and saving techniques and to avoid impulse purchases.
The richest man in Babylon (George S Clason) Simple and short book for teens. This was one of the first finance books I read and it gave me the foundation I needed to handle my money well..
It relays invaluable and timeless lessons of finance through legendary tales set in ancient Babylon. Learn how to gain money, keep it, and put it to work to generate more wealth for you. It’s one of the bestselling financial books of all time. (Amazon Excerpt)
Money for Beginners—(Eddie Reynolds & Matthew Oldham) An informative introduction to the world of money, covering everything from bank accounts, earning and borrowing to government spending, taxes and inflation. With bright, infographic pictures, a detailed glossary and links to selected websites where you can visit a virtual bank, see money from around the world and more. (Amazon Excerpt)
Age range 8 to 15 is an important time frame for setting the tone for our children’s financial future.
Remember our children are looking at us and our attitude and behaviour towards money, spending, giving and saving. The more open we are in our conversations with them regarding these topics (age appropriate) the better they learn.
This completes the second part of this article. Parents we tackle ages 16 and over in the last article the link found here.
I hope you have found this information useful. Please share with those you think can benefit from this information, parents, aunties, uncles or grandparents.
For the first article from this ‘Financial Savvy Kids series, please click this link ‘Develop Financial Savvy Kids: What Parents need to know?—Part 1’
The information provided in this article is not intended as financial advice. Please contact an authorised financial advisor for specific advice regarding your situation.
Written by Neala Okuromade
- Qualified Accountant (FCCA)
- Diploma in Financial Advising (MLIBF)
- Practising Financial Coach and Author of the book series ‘What’s Your Financial Gameplan?’
Neala Okuromade is an experienced and reputable financial coach. Neala is taking on a new cohort of clients looking for guidance and help. Click this link for more information.
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