How to make your kids moneywise
With the scrapping of CTFs, there has been a big focus on new ways to save for your children's future.
But equally important is making sure you provide your young ones with some savvy about money matters.
That way, when the day arrives for them to step out into a world of banks pushing credit, they may have the sense to say no.
Introduce your kids to coins first
Teach them the value of different denominations, allow them to hand money over in shops and see the change they receive and then buy them a piggy bank and encourage them to use it.
Set a savings habit
Better still, give them two piggy banks – one for spending and one for savings and encourage them to put half of what you give them into each.
Make sure they know they can only take money out of the savings piggy bank if they have checked with you first.
Set up a savings account in their name
Explain how their money earns interest. Make regular visits to pay a little bit in, even if it's only a few pounds, so they can see how the money mounts up.
Check out the bank offerings
For instance, HSBC's MyMoney scheme includes both a savings and (from the age of 11) a current account, with monthly statements. Very grown-up.
One top buy at the moment is the Halifax children's regular saver, which offers 6% interest AER fixed for 12 months. You must save between £10 and £100 per month and no withdrawals are allowed within the fixed term.
Develop their budgeting skills
Get them used to using their pocket money to buy something they really want. Encourage them to save for it over a number of weeks, rather than forking out yourself on the spot.
This will help them learn that they can't always have instant gratification and give them the satisfaction of saying they paid for it.
Introduce a monthly allowance
Once they get a bit older, a monthly allowance for specific outgoings will give your children greater control. This could be for cinema trips with their friends or for topping up their mobile phone credit.
But make it clear that they're in charge, and once the money's gone, it's gone. Try not to be soft and bail them out too often if they run short.
If they want to boost their finances, offer them the chance of taking on paid odd jobs around the home, such as washing the car or cleaning out a cupboard, with payment on completion of the task.
As they get older think about allowing them to babysit or take up a part-time job. Make it clear that you will only support their job if their shifts don't interfere with school work. If they are doing it to save up for something really important to them offer to match what they earn.
Practice what you preach
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.