The innocence of youth is something you want to maintain in your children for as long as possible, but at some point or another, you’ll have to start discussing some of life’s harsher realities. One of those realities is that money matters and finances need to be managed carefully in order to be able to successfully navigate adult life.
Creating a budget, saving and generally staying in control of your finances are all things you need to be talking to your kids about to prepare them for adulthood, but at what ages should you be introducing certain concepts? Here are four key stages on the timeline of financial maturity, along with some rough guidelines on what age to start having such conversations on finances.
An introduction to money – 3-5 years old
No, this doesn’t mean sitting an infant down to an introductory seminar hosted by you, but this age will be when your child is likely to first encounter the concept of money, which you can gently encourage.
This starts with playtime. Plenty of kids like to play shop, with toys like cash registers and pretend money still popular amongst young kids. The imaginary store in the living room isn’t just great fun but also a valuable education point. When you hand over a £1 coin in exchange for a plastic banana, your child begins to understand the basics of commerce.
Take that forward into your first actual shopping trips together and allow your child to engage with the buying process. Nothing serious, just baby steps, but valuable all the same.
Pocket money – 6 years old onwards
The introduction of an allowance gives your child their first taste of money management. As a child, the excitement of payday (£1 or so in this case) and what to do with your newfound riches is something we’re all familiar with, as is quickly realising you can’t afford everything you want to buy.
A trip to the shop — what to get? Do you blow all your money on sweets or buy a drink at the expense of more pick and mix? Is there a toy you have an eye on that will take weeks or months of disciplined saving to afford? Is it worth saving your pocket money in case something bigger and better comes up?
All very big questions, and the same ones most adults go through on a grander scale pretty much every day.
A bank account – one from birth, one from 11 years old
As soon as your child is born, you may well want a building society account ticking away in the background, bankrolled by contributions from relatives and the like. You might want to keep this account private from your child until they’re at an age where they understand its importance or need the money, as then you’ll have given them a truly useful financial start in adult life.
Of course, as the allowance figure increases, the need to store it somewhere safer than a novelty piggy bank will grow. From the age of 11, your child can open their own bank account. This is often a simple account that upgrades to an adult account at 18 years old. Your first trip to the bank together, and setting up the account, is an important experience.
Investments, debt, and cards – mid to late teens onwards
The more complicated, yet still highly important money matters like making investments, managing debts and using debit and credit cards can come a few years into your child’s teenage years. The most important aspect to teach them is about how easy it is to get into debt if you’re not careful, not to mention how hard it is to get out of.
With one of the primary sources of debt being credit cards, it’s worthwhile introducing your child to a cash card as a starter for ten — that being a card you load with a set amount of money, meaning they have a set figure to spend which they can’t surpass. The process of spending on plastic is a useful one to learn, while the cash limit will also remind them to spend only what they earn and nothing more.
Teaching your kids about money and finances might not be as awkward as the “birds and the bees” conversation, but it certainly is just as important. Of course, the age brackets listed above are mere guidelines — everyone’s situation is different, so if you feel it appropriate to talk about certain things sooner or later then trust your judgment over anyone else’s.
In the end, as long as you feel your children are heading into adult life properly prepared for the rigours of financial management, that’s all that matters.
Thanks for stopping by today, I hope you’ve enjoyed this post.