From the age of 6, children can use debit cards linked to their parents’ account, and at age 14 they can have their own bank account. How to prepare your child for the arrival of their own money and how to teach them to manage it, now let’s talk about it!
1. Giving Out Pocket Money
You can start with the 1st grade in school, because at this time children are usually more independent and they have a desire to buy something. It is good if such small purchases allow your child to feel independent. It is doubly useful to give your child pocket money in a non-cash form. Now you can make children’s cards, and this is an additional opportunity to explain to children what banking products are.
2. Children’s Card
Another advantage of cards – the transparency of expenditure without unnecessary questions to the child himself. But it’s better to gradually train him to be independent and avoid hypercontrol. At the initial stage you can check on the transactions, and then – just set limits, agree that you will discuss major expenditures together, and increasingly release control as the child grows up. Given that cash is almost out of circulation, you don’t have to teach your child how to handle cash before giving the card. The practice of shopping can also be explained using the example of non-cash. The mathematical calculations and rules of financial security will not change from this.
3. Form the Value of Money
The first concept that your child should have of pocket money is very simple and very important: “I just spent an amount of money. How can I get it back from somewhere?” This is how the understanding is formed that money is always a limited resource.
At the initial stage of acquaintance with money the child may not fully understand its value and just give it to someone at school. In such a situation parents should explain what happens: “You gave money away, so you can’t buy what you want anymore. If the child has spent all the money and then asks for more for school lunches, it’s a good time to teach responsibility and explain the concept of borrowing at the same time. You might say, “Okay, here’s extra money. But we weren’t planning on giving it away, so you’ll have to pay it back gradually.”
It is desirable to stipulate a fixed amount which the child will now receive regularly, and what this money is intended for. When we tie financial rewards to some kind of success, it helps to understand that money requires effort. Important rules should be laid down in the preschool age as well. For example, before getting something, you usually have to wait. It is possible to show the difference between the desirable and the really necessary on the example of fairy tales or own life situations.
4. Pay Attention to Intangible Values
- To teach saving, it’s important to talk about the value of intangible resources. For example, explain to your child how he can contribute to the family budget. If he helps his parents at home, in the cottage, tries not to spend money needlessly – it means he saves the health of his parents, who would have to work more, and the common family purse.
- To learn to save money, it is worthwhile to encourage children to make cards or handmade gifts. It is useful to make a list together with your child of the costs required for such handmade goods, and explain the benefits: it is cheaper and allows you to learn new skills. Point out to the children how intangible resources such as time, knowledge, and creativity are used. If a child wants a new game or a smartphone, that’s a great reason to teach him or her how to collect the right amount. And even if the out-of-pocket expenses are not so great that he will save the full amount by himself, you can involve him at least partially in big purchases.
- Sometimes it happens that the child cannot cope with the temptation to spend all the money. If he is not able to save up for yourself, you can together make a piggy bank and put aside 10% of each amount of pocket money. And then together joyfully open it. After the first big purchase with the saved money, the child has a new experience that teaches him that self-restraint can bring great rewards. In adulthood, it’s much harder to teach yourself to save.
- And if you’ve been used to saving all the time since first or second grade, if there are happy childhood memories of buying a bicycle, you no longer have the inner pain of having to save some money.
That’s It!
And most importantly, one of the ways to communicate to your child the importance of investing is to choose a tangible investment goal together with them. Be an example to your children!