How to be a strong financial role model

Financial management is not something we are born with. Spending patterns are learned behaviour. If you feel you need help to manage your money better, you need to take advice and guidance before educating your children. Once you have learned how to control your money, you can teach your children to do the same.

How to handle money is one of the best skills you can teach your children. Showing strength and constraint regarding money and saving for the future will stand them in good stead throughout their lives.

Schools do not teach enough about money skills; as a parent, it is your responsibility. If you ignore this, you risk your children growing up being financially irresponsible and landing themselves into debt and a cycle of financial issues.

So, where do you start?

Here are some ideas on how to help your children be great with money

Start Young 

Good habits with money start at a young age. Set up a system to earn money for chores and teach them how to save. You can start this from as young as 3-4.

From a young age, teach your children the names of coins and notes and play games that involve money. For example, imagination play being a shopkeeper! Use coins to draw around and to make patterns and designs!

Teach your children about ‘want versus need’. An important concept to learn in life. For example, they might want the latest toy but discuss how they can purchase this.

It could be using birthday money or savings but also raise the subject as to whether there is a less costly alternative.

With birthday and Christmas gifts, always save at least half. Put this in an account where they can see it grow. For example, every Christmas and Birthday, if they saved £100 by the time, they were 18, they would have at least £1800 (could be more depending on where it was invested). Quite a little nest egg which could go towards driving lessons or their first car. Teach your children that they cannot have everything they want. Boundaries set at an early age will reap the rewards later. Let them decide how to spend their saved money.

Tweenagers to adulthood

Once your child is around 9-12, they can quickly begin to learn the pricing and value of goods and services. For example, when going out for a meal, discuss pricing. Talk about the items they are saving for and where they can look for price comparisons. Get them familiar with the concept of checking for the best price for an item or the best deal in a restaurant.

As your child reaches their teenage years, open an account with a debit card so they can start to learn how to manage money online. Then by the time they are working part-time, this process is familiar to them. It is essential to work with your child before they go off to University and teach them budgeting for food, utility bills and rent.  Take your children food shopping so they know and understand the price and how to shop for the best deals.

Being honest

Lack of money can be a source of shame and embarrassment for many parents. If your children are aware of your financial situation, they will then start to understand. Saying no to your children is ok! Transparency is important. Hiding the problem if times are tough is not the answer. A careful explanation will gain respect from your children. You do not have to share specific numbers, just an overview and a sense of where you are financially. Share the basics of what you can and cannot afford but avoid using the word afford. A good expression is to say, ‘we choose to spend our money on this instead’. Children then understand there are always financial limits in life. This is not about burdening your children with financial woes but encouraging open and honest conversations.

Stop overspending 

Overspending, living on credit and living for today seems to be the theme for many people. However, if your children see you constantly needing the gratification from buying the latest gadgets, clothes, and jewellery, they will emulate this later in their life. This is because spending habits are formed at an early age, and children mimic parental behaviour. Make sure you spend within your means and save. Teach them openly this is what you do and they will follow your example.

Credit

To get a credit score, you need credit but teach your children not to get into debt. It is all about paying off the credit cards each month! Explain how credit scores work and the importance of always paying bills on time. They need to be aware that credit cards are not the same as bank accounts and that any money not paid off will accrue interest, and late payments affect their credit score. Share the pitfalls of loans and create positivity around saving for what you want or need.

Discuss the future

Plan your children’s financial future with them. Talk about saving for University, driving lessons, a car and first house. Share your experiences and ideas with them. Discuss pensions and investments and how money can grow. The earlier a pension is started, the more money they will have later in life. They must be aware of this. Saving for a house is, essential and there are several ways to do this, so explore the options with them. Invite elderly relatives into the discussion; they can share their experiences on savings and life experiences with money.

Teaching your children strong solid financial skills is vital. Be a good role model and set an example to lead the way to good financial habits. You might not have had a strong start yourself, but you can move back on track. In turn, support your children to make good choices and be strong around their options of spending and saving money.