Written by: Kim Jones
I shouldn’t have been awake, but I was excited because it was Christmas Eve. Plus I was listening out for the jingle of Santa’s sleigh-bells, and the sound of reindeer hooves on the roof. But instead of jolly laughter from downstairs, I heard something else. Mum was crying, and dad was trying to calm her down. This didn’t sound right – perhaps Santa had bought the wrong presents, and mum was upset. Or perhaps dad and Santa had got in a fight over who should eat the mince pie.
The awful truth
I crept downstairs and eavesdropped behind the door. What I heard has stayed with me for the rest of my life, and affected me deeply…in surprisingly a good way. Mum was crying because she’d used credit cards to pay for Christmas. She’d spent hundreds of pounds that we didn’t have, so her three children could have turkey, tinsel and the latest toys. Dad was telling her it was OK to be in debt, it’s what credit cards were for, but mum couldn’t be consoled. I crept back up to bed feeling dreadful. Not only had I discovered Santa didn’t exist, but I’d also discovered our family was in debt.
Several weeks later we were evicted and had to move to a much smaller house. All those Christmas toys had to be given away, because there was no room for them in our tiny property. I remember crying as my life-sized baby giraffe was carted off in a transit van… But one toy I didn’t give away was my piggybank, and ever since I was a child, I’ve saved diligently, determined never to go into debt like my parents. Now I’m a parent myself, and it’s time to teach my own children to be money conscious. It’s best to start as early as possible – by doing this, you will help them make better decisions in later life.
Monkey see, monkey do
Remember, children learn from everything you do. Teaching your child to be money conscious means leading by example.
Make them earn it
Don’t dish out pocket money without making them work for it. I’m not talking about sending your six year old up the chimney – making her pick up her toys, or tidy her room is enough to make her realise that work equals money.
Limit treats and toys
It’s tempting to dish out treats and toys willy-nilly, especially to calm down a tantrum. But limit new toys to once a month, and explain to your child they can’t have everything they want whenever they want.
Set a price limit
Tell your child they can have a new toy, but it has to be under a certain price, say £10. If your child picks out a toy above that price, tell them it costs too much, and that they will have to choose a cheaper one.
Open a savings account
Consider a Junior ISA or savings account for your child. Encourage them to deposit a proportion of their money on a regular basis, and teach them how to track interest too.
Match every pound your child saves, within reason. As they get older, 25% or 50% might be more reasonable.
To help your child visualise their financial progress, draw a picture of an empty thermometer. As they save up, colour in the thermometer accordingly.
Make a wish list
A wish list can help identify things for your child to spend cash on. This can help with prioritising – a useful skill in later life.
Put up a picture
If your child is saving for an expensive toy like a bike or computer console, pin a picture to the wall. This will remind them what they’re working towards.
Splash the cash
Sometimes, children will get so focused on spending cash that they will not want to spend any of their savings. You don’t want to raise a little Scrooge, so encourage them to dip into their stash occasionally on small purchases.
Charitable donations and sharing
Get your child into the habit of giving to charity, and being generous with their cash. Encourage the occasional purchase for a friend or family member and charity donations too.
Alert your child to the dangers of borrowing
Learning about interest is hardly very interesting, but if your child borrows money from you, try adding on a small amount of interest. They’ll be keen to pay you back as soon as they realise their loan is getting more expensive by the day. The biggest shock of all could be giving them a cash loan and then applying the same ridiculous rates as the ‘Pay Day Loan’ companies that advertise on TV, although that would be a drastic measure. But saying that, if you don’t teach your child about cash and borrowing early in life, one day they may end up taking out a Pay Day Loan for real, at a ridiculous 4000% APR. A truly dreadful thought.
Best buy them a piggy bank now and start them on their way to a sensible and secure financial future.