We all want our children to grow into successful and responsible adults. One step I’ve taken is to give my children a notebook so they can keep track of the ins and outs of the small allowance their grandparents give them. So, if they receive some money, they jot down the amount. Equally, if spend some of it, it is recorded. Just in case you think I’ve morphed into a modern day Ebenezer Scrooge, we keep track of it but we’re not following any International Accounting Standards! The idea is that they take responsibility and learn from patterns. 

Money apps for children are a good idea too, with Revolut Junior and An Post Money Mate are two options in Ireland. These are particularly good for young teenagers. My kids are a little younger, so I’ve taken the approach that a pen and paper gives them a bit of more ownership. 

As you teenagers move to young adults, the theory gets a bit more complex! That been said, if I had to think of three important concepts I would like to pass on they would be:

1) The time value of money
2) Compounding – the positive compounding of investments versus the negative compounding of debt.
3) The concept of an index fund - Owning all of the great companies of the world

Teach them the Value of Money
When young children have all of their needs provided for, it’s easy for them to believe that money grows on trees. They don’t see the bills that need to be paid or understand that sometimes you need to prioritise your budget.

As they get older, it’s important to show children that money is a finite resource. For example:

• Discuss with them how much things cost.
• Allow them to budget with a fixed amount of pocket money every week.
• Encourage them to weigh up purchase decisions. Should they buy a bag of sweets now or a coveted toy in a month’s time?
• As they get older, talk about the family budget.
• When they start to think about a career, help them understand the earning potential, and corresponding lifestyle that comes with various occupations. 

Instil Savings Habits
If children learn how to save money when they are young, this sets them up for a lifetime of good financial habits. 

Even a small amount every week can build up, whether this is in a piggy bank or a savings account. Many banks offer preferential savings rates for children.

Encourage your child to set goals and work out how much they need to save, and for how long, to buy the special toy they have always wanted. Imagine how proud they will be when they can buy it with their own money. The skills and mindset developed will set them in good stead when it comes to saving for a car or a house deposit.

You can even reward savings habits, for example, by matching the amount they choose to save every month. This will help associate good habits with a positive outcome. This could help them to see the benefits of tax relief or employer contributions later in life. 

When considering longer-term savings, show your children the power of compound interest. You can use online calculators to demonstrate that the longer they save, the more their money will grow.

Learning About Investing
Investments are an important aspect of financial planning, but are rarely learned about in schools. Without proper investment knowledge, young people are unlikely to feel empowered to make financial decisions. The consequences of this could be:

• Avoiding investments altogether.
• Not understanding the investments in their workplace pension scheme, or realising that they can choose their own funds.
• Following online tips or putting all of their savings in cryptocurrency.

You can teach the basics of investing by setting up an investment account for your child and involving them in the fund selection process. Learn about the companies that make up the portfolio and show them how the value changes each year.

Encourage a Work Ethic
From an early age, children can be taught that their actions have consequences. As well as disciplining poor behaviour, it is equally, if not more important, to reward good behaviour. 

Rewarding children for helping with household chores can help them understand that hard work pays off. 

When they are older, encourage them to take on part-time work, as this will teach them to value their independence. It can also enhance their CV when they start to pursue a career and prove that they are capable of taking on responsibility.

Introducing rewards for academic success is something you might also want to consider. But it can be more productive to focus on effort and work ethic rather than pure achievement. This teaches good habits and resilience rather than focusing on a goal that not all children will find achievable.

Use Apps and Challenges
Children can engage with anything if you make a game out of it. For example, by ticking off ‘challenges’ (basic household chores), they can unlock different ‘levels’ and earn more money.

There are multiple apps available to help children to manage their pocket money and savings. Some of these are even linked with a bank account or debit card, so that pocket money is released when certain tasks are completed.  

Set a Good Example
A client once said to me that there are only two types of people in this world – savers and spenders. There is some truth to this, as we all have a basic bias when it comes to money. Children don’t need a lot of money to learn about it, but they do need boundaries and positive guidance. So, if they are buying something I typically ask them do they really need it. One of the most important things for children to avoid is impulse purchases. 

The following can help to build financial security and help your child build positive habits for the future.

• Stick to your budget and curb overspending - no spending more than you bring in.
• Avoid expensive debt, like credit cards.
• Save for the future and always keep an emergency fund
• Set goals and work towards achieving them.
• Automate everything!  Automate savings & investments – if the money has left your account you can’t spend it. You’ll reach your goals
• more quickly by automatically investing your money. 

Children learn quickly, and it may surprise you how well they engage with basic financial planning. Keep it consistent, entertaining, and age appropriate, and they will become money savvy in no time.