The cost of living crisis is showing little sign of easing up this year as inflation remains in the double digits, supermarket prices continue to soar and energy bills are set to rise by around £500 from next month. While most households across Scotland and the rest of the UK have tightened their budgets and reduced spending to limit the financial impact of the ongoing economic crisis, it can be tricky explaining changes to younger members of the family.
Personal finance expert Rhiannon Philps from NerdWallet, says that no matter what happens, parents often try to shield their children from money worries and continue as normal. But she warns that mums and dads across the nation may be missing out on a great opportunity to teach children about money and ensure they pick up good financial habits from a young age.
A recent study from Startling Bank found that more than a fifth of parents don't know what to teach their children about money, and 20 per cent lack confidence in their own ability to educate children on finances.
Five top tips for teaching kids about money
To help parents, guardians and carers teach children those all-important money lessons, NerdWallet’s Rhiannon Philps shares five top tips to teach kids.
Make money widely available
The first step is to get them to understand money - what it is, what it looks like, and when they need it. This can be more difficult in an increasingly digital society, but there are steps you can take. One of the best ways to do this is to give them a money box or set them up with a personal bank account that they can access.
Once this is set up, you can discuss why it’s important for money to be kept safe, how it adds up, and what that money can be used for - for example a new toy or an experience. Encourage them to view their bank account regularly, or spend time with them counting the money in their money box.
Lead by example
Children learn by watching what adults do, which means it’s important to lead by example when children are present.
This could be getting them involved in checking prices and discounts on everyday items to make sure deals are worth it, or asking them to swap out big brands for cheaper own-brand counterparts and explaining why you’re doing this. When it comes to paying, if you pay in cash, you can get them to hand over the money and help you count the change.
Make money part of everyday life
It’s hard for children to learn anything if it’s not in their routine. To help them understand money better, get them to use it regularly, give them their own money to cover everything they are doing that day in a wallet or purse, and make them responsible for looking after it and paying for anything they buy.
If they want something extra, it’s a good opportunity to explain that the money will not cover everything, and ask them to choose. If they have a bank account, do the same, but make sure the app updates in real-time. This way, you can show them how much money they have left and help them to budget.
Teach them about saving
Budgeting is only one aspect, saving money is just as important but can also be a difficult habit to form. Teaching children at an early age to save can be hugely beneficial for them later in life as they can get used to putting away some money into savings on a regular basis.
If you give them pocket money or they earn money by doing small jobs around the house - such as keeping their bedroom tidy - make sure to put this in a pot - either physical or digital - and let them see the amount adding up over time.
From there you can explain how money adds up, and how they may have to wait for certain things by not spending anything, or a smaller amount, for a couple of weeks or months. Not only will this help them understand the basics of saving, but it will also let them appreciate the value of money.
Set a goal
Once the basics of saving are established, it’s a great idea to set a savings goal with your child. This could be for anything, such as a new toy, game or day out, but helping them to set a goal and visualise what they will get at the end of it will keep them motivated to reach the goal.
To keep up to date with the latest cost of living news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, or subscribe to our newsletter which goes out Monday to Friday - sign up here.
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