Frustrated by your children’s lack of interest in managing their money? Then pick up a few tips from top financial professionals on how they encourage their offspring to start saving.
When it comes to finance, education really does start at home. How children talk about saving with their parents or earn their pocket money could help them get into good habits at a young age.
More than four in 10 (43%) people surveyed by Santander say their parents were the biggest influence on how good – or bad – they are with money, and more than half (53%) say they wish they had received more money advice at a younger age. Here, 10 experts reveal their own approach to engaging their children – of various ages – about how to deal with money.
Simon Healy, managing director of savings at Aldermore
In the run-up to our family holiday to Walt Disney World in Florida, I saw an opportunity to teach my two kids, aged nine and 11, the importance of saving. I promised to double any pocket money they saved for the holiday, where they would be free to spend their savings on whatever they wanted.
This generated enough excitement that they sacrificed their usual weekend tradition of spending their pocket money straight away and instead they both tried to save almost every penny they had. I think they felt the full satisfaction of having worked hard and been patient to be able to buy something big, exciting and enduring rather than frittering it away on small things that are quickly forgotten – and the conversion to dollars helped them feel like they had even more. My daughter has kept up saving since we’ve got back, my son not so much.
Holly Mackay, founder of Boring Money
I’ve bored my kids with the basics for a while, but sibling rivalry has now started to kick in. My scatterbrain means that their Junior Isa investment portfolios differ in one of their five funds – my son has a regional Asia fund while my daughter has a global equity fund. This means my son’s portfolio is up 14%, while my daughter’s is up 19% – it has caused outrage! We have now had detailed discussions about world maps, different countries’ stock markets and risk.
I wasn’t convinced it was sinking in, but when my seven-year- old daughter explained she wanted another risky Asia fund because it was OK if there were three risky funds as it was unlikely they would all lose at the same time I suddenly realised sibling rivalry had driven her to understand the basics of diversification.
James Daley, founder at Fairer Finance
My five-year-old has got to the point where she wants something every time we go to the shops. We try to make sure we are regularly talking about money at home and how we do not have an unlimited supply of it. When she is given money, we let her spend it how she wants in the hope that she starts to understand the cost of different things. We’ve talked to her about saving, but she hasn’t got the patience to resist instant gratification yet.
Instilling financial discipline in your children is not easy and it’s something that you do over a long period of time. I got a paper round when I was 13, and there was nothing like having some of my own money to help me learn about saving and spending responsibly. I’ll encourage her to do the same, or whatever the modern-day equivalent of a paper round is – perhaps selling fashion tips through social media?
Maike Currie, investment director at Fidelity Personal Investing
When my nine-month-old daughter, Elise, throws her lunch across the room or destroys a new toy there is already the temptation to spout the saying: “Money doesn’t grow on trees.” But the real challenge is taking the time to actually explain where it does come from. Being smart with your money is as much about spending wisely as it is about saving – I don’t want to create a compulsive saver or someone who hoards cash or is afraid of spending it – it’s about getting the balance right.
I hope that by the time Elise reaches her teenage years she has a firm understanding of compound interest and credit cards; if she understands the magical power of the first and the dangers of the second, then we’re half way there.
Nici Spaccatrosi, managing director of Saga Money
I wish we had started financial education with my 11-year-old son, Luca, a little earlier. We got him a bank account and debit card last year, but there was a time he ran his account down to zero after buying too many online games. Luckily, he couldn’t go overdrawn but it did make me think about the importance of learning about debt. He’s learnt his lesson now, but the hard way.
My nine-year-old daughter gets £2.50 a week pocket money and we use the GoHenry app with her. It means she has a debit card, but we can restrict her spending and it lets her set up savings goals, which has helped to get her interested.
Helen Bierton, head of savings at Santander
My children are six and four, and I’m really keen for them to understand money from an early age. I want them to understand the value of things and how you have to make decisions about how to use what is a limited resource. We bought them each a piggy bank, which they could personalise by painting it themselves, so it feels special to them. They like putting their coins into it, hearing them shake around and then counting them out, which is really helping them learn about the different value of each coin.
We’re starting to talk to my six-year- old about saving up for things, so if she sees something she wants in a shop we take a picture and put it in a scrapbook. Hopefully, this will teach her about not just spending in the moment; she keeps a record of how much money she has and works out when she will have enough to buy it – we’re currently saving up for a £28 toy pony.
Ian Price, divisional director for pensions and consultancy at St James’s Place
My two daughters are now in their twenties and will soon be working full time. The biggest change for them now is moving to a stage in their life where they can’t rely on the Bank of Mum & Dad to always be there. The financial advice I gave them is the same my dad gave to me: spend less than you earn.
It’s simple, but effective. I have always talked to them about working out a budget and sticking to it and they are pretty good at this – I find their generation is good at shopping around to get the best deal on everything from phones to insurance and holidays. Working in financial services, it’s easy to want to do everything for your children, but part of helping them is letting them stand on their own two feet. Although I’m sure they know the Bank of Mum & Dad hasn’t completely closed its doors – yet!
Ella Hastings, head of marketing planning at GoCompare.com
My two children are in primary school and I trust them to look after their own money so they have room to make their own mistakes and hopefully learn from them. It is really hard when you see your child lose or waste money not to step in, but I know that if I take over they won’t be able to learn the consequences of their actions.
We use the GoHenry app as an introduction to having a current account and, while they’re not comparing car or home insurance yet, I do encourage them to compare the prices of things before they buy.
Danny Cox, chartered financial planner at Hargreaves Lansdown
When I was a child, I earned pocket money from Saturday jobs. Before my brothers and I could go outside, we had chores to do and sometimes there would be the chance to earn more. It was a simple concept: the more I worked, the more I earned. I passed this down to my own children, who are now 28 and 24.
The chores may have changed – now there are dishwashers to empty rather than dishes to clean – but the principles are still sound. As they got older, I encouraged them to take part-time jobs by matching what they earned, turning a minimum wage into something more meaningful.
Guy Simmons, head of product at Nationwide
My nine-year-old daughter’s favourite toys are Shopkins, and I’m using them to teach her about delayed gratification. I explained to her that she could have a Shopkin toy each week or she could save up to buy the big Lego toy she really wants. She’s decided to wait for the Lego. Both she and my four-year-old son have a Junior Isa, which we save into – and relatives chip in too. I’m keen they realise that they are lucky to have this nest egg because other people have made sacrifices for them.
Holly Black is a freelance personal finance and investment journalist.