My Money Week is a national initiative designed to raise awareness and provide education on financial issues to primary and secondary school children in the UK.
In 2022, it falls between 13 and 17 June.
Whether you have young children and grandchildren at primary school or nephews who will soon be heading to university, there are money lessons that we can all impart.
From understanding the value of money and simple budgeting through to debt management, keep reading for five key financial lessons to teach your loved ones this My Money Week.
1. The value of money
The first step will be to teach children that money is needed to buy things, and that money must be earned.
For primary-aged children, lessons might involve understanding the value of different coins and how they equate to specific items like the food they eat. Getting to grips with this will also provide the invaluable lesson that money can run out!
As children get older, providing pocket money for errands and household chores will instil a sense of pride in the money they earn.
Be sure to grant your child the independence to choose how they spend their money. This responsibility and freedom will help them build an understanding of the benefits of saving.
2. The difference between saving and spending
Once your child has started to earn pocket money, they might set their sights on an expensive item that requires saving for over weeks or even months. This can be a harsh lesson.
Taking money out weekly to buy smaller items, while leaving a larger pot aside for this dream purchase, will introduce your child to budgeting. Spending in the present provides instant gratification but prolongs the acquisition of their dream purchase.
The same rules apply whatever the age of your child. Once they are old enough to begin a Saturday job or other casual work, consider asking them to contribute a small amount to household bills.
3. The importance of a rainy day fund
We don’t always save just to spend. Putting savings aside to protect ourselves from a future emergency is crucial too.
While your primary school-aged child is unlikely to have a sudden need for vast sums, the concept that money can be saved without a future spending goal in mind is important.
As part of your instruction in budgeting, you might opt for separate piggy banks. One would be for day-to-day “needs”, one with a specific longer-term purchase in mind, and one to be kept aside for the future.
The difference in cashflow into and out of each piggy bank will give your child something to visualise when you open a bank account for them.
4. The difference between saving and investing
It might seem early to be advising children to invest for their future but the sooner they develop this mindset – or at least become conscious of it – the better.
Saving for retirement or investing – through a Junior ISA (JISA), for example – involves putting money aside for a future goal while not being able to access those funds in the present.
The reason why investment works – investment returns and compound growth – might be over the head of a young child but the lesson will creep in as they get older.
Starting a pension or JISA for a child at a young age – and ensuring they are engaged in the annual statements they receive – should help to ingrain the habit of paying their future self first.
5. How to open a bank account and how overdrafts work
Setting up a bank account for your child – and explaining how saving and accruing interest works – is a good financial foundation.
As they get older, they’ll need to understand what to do if they don’t have the money they need. This means grasping the concept of good and bad debt.
High-interest debt like credit cards can become a real problem if repayments are missed. So too, student overdrafts. These are often interest-free while the student is in education but missing repayments post-study can see debt rack up.
Your child needs to understand how bad credit could affect their chance of getting a mortgage, or other credit, later in life. Some debt, though – if successfully managed – could help to improve a credit score so frank discussions will be key.
Get in touch
If you would like help setting up a pension or JISA for your child, or you have any questions about providing financial education to a loved one, speak to us now. Get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
The value of investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
