Teaching children and young adults about money and finances early in life can make a huge difference in how they view and manage their financial affairs as adults. There are many ways that we can do this. This should result in children being more equipped to manage money methodically and knowledgeably when they do set out on their own. Here are some ways we can teach money management to the youth of today.
Encourage them to save
Even very small children can be taught money management. Lots of children are given pocket money to spend each week but many don’t understand that if they save over a period, they may be able to afford something bigger or better. If a child wants a new bike, for example, explain to them how long it will take to afford it and how much they need to save each week. If a child is buying something using their own money, they will become more aware of what things cost and less likely to spend money hastily or frivolously. When they do get the item, it will become more special because they worked so hard to get it.
Go Henry is a great idea for older children. They are provided with a debit card and you can transfer money to their account weekly or as a one-off payment. Payments can also be linked to allocated chores or tasks and only released once you confirm, via the app, that they have been done. This teaches children responsibility and accountability at the same time. It also gives them a basic working knowledge of digital banking methods.
Explaining mortgage basics
Many adults do not understand how mortgages work or the differences between the likes of a fixed rate compared to a variable. If a child has even a basic understanding it could make a huge difference as they get older.
Use an online mortgage calculator from mortgage brokers like Habito.com to explain and show different lending scenarios and repayment calculations to them. Giving them the knowledge that interest is payable in addition to the initial borrowing will help them understand the huge financial responsibility that comes with owning a home.
Making working teens and young adults pay board
Asking teenagers or young adults to pay rent or board is something that many parents implement and is a fabulous way to teach responsibility to those who are working. Many parents go down this route regardless of whether they need extra financial help.
If they are made to pay towards the household, they should not only appreciate their surroundings more but will very quickly learn that no one can live for free. Whilst some might not be very enamored at the prospect, many young adults will get a great sense of achievement knowing that they are contributing. When they do fly the nest, they will already be equipped with money management skills that they would otherwise not have.