Few things are more important for a parent or guardian than building the strong foundations to allow children to achieve a successful and happy life.
Money is not the be-all-and-end-all, but it does impact and influence most aspects of our lives. We can’t make our children’s choices for them as they grow, but we can instil good financial behaviours that will help set them up positively for whatever the future may bring. Good financial habits are essential whatever life stage we are at, our current financial position or what our future prospects may look like.
How to inspire good financial habits in children
And like learning a new language, the earlier these positive habits form, the easier they are to become deeply embedded and second nature. Here are five tried-and-tested methods that can gear up the younger generation for a life of financial well-being and, ultimately, fulfilment.
Setting up a savings account for children is a great way to set them off on a positive financial footing. A professional can help assess which approach is best for your circumstances and make sure your money works hard for you and your family.
Being able to demonstrate the benefits of saving to your children as they grow is also an excellent way to instil the value of money and how a disciplined approach can help them achieve their goals – be that a first house, university or even their first car.
2. Budgeting/Spending/Credit cards
Budgeting and spending can be tricky even for adults, so it’s no surprise that ensuring your children have a firm understanding and grasp of budgeting and spending early on can have an overwhelmingly positive impact on the rest of their lives.
Set challenges – I.e., discuss various ways pocket money can be spent. For example, ask them to help with the weekly shopping list based on a set budget – if we buy X, can we afford Y? Talk them through what paying on finance or a credit card will actually cost in the long run and how that money could have been better spent.
The chances are that children and young adults will enjoy the responsibility that comes with these decisions whilst developing a firmer grasp on finances as a result.
Pensions may be the last thing on a young person’s mind, and even when they enter the world of work, the prospect of holding back money when accessing significant amounts for possibly the first time won’t be a natural thought process.
Teach children the importance of planning for the future and the tax benefits that come from accruing money in a pension pot from an early age, and the idea of ‘giving up’ money through a pension scheme won’t come as a shock. It will, in fact, be accepted as a sensible and pragmatic approach.
Investments don’t just come in the form of big plans such as getting on the property ladder – although that is likely to be an essential consideration down the line. Opening a young person’s eyes to investment opportunities at all levels – including the risks and rewards – is a great way to evolve their understanding of money.
Specialists such as Redwood Financial can help identify the most suitable options for any given scenario.
5. Teach the value of money
Having a healthy relationship with, and a deeper understanding of, personal finances literally pays as a young person develops into adulthood. Whilst it would be patronising to assume all young people believe ‘money grows on trees’, the reality is that as we progress through life, fewer and fewer things are handed to us on a plate without us having to consider how they have been financed.
If your child has identified something they want, why not discuss how many household chores or weeks of pocket money will be required to make the purchase. Such thought processes help evoke a sense of responsibility, reality and achievement.
We are here to help
At Redwood Financial, we believe in treating Clients as people, not just as a number. This “family” philosophy makes our company unique amongst many other financial advisers and is something we are very proud of. What makes us different is that we prefer to work with families as we believe helping families is the most important and rewarding thing we can do.
We can help you understand how to save for your children’s future education and life through a broad range of Junior ISA products, Investment and Savings Plans and Trust Funds. Please complete the our contact form or call us on 01489 877 547.