How to get your kids on the budgeting bandwagon
According to the Barclays LifeSkills Youth Barometer research, nearly a third of young people want to better understand the nuts and bolts of managing money.
This might be, in part, because money remains one of the great British taboos. But talking money with your children is incredibly important, as is instilling good habits as early as possible.
Here are my top five tips to start talking about the basics of money management with your children.
1. A monthly allowance
Many parents give their teenagers an allowance. This can help them learn the value of money management and budgeting. But it can be tough for parents to stick to as sometimes kids spend their allowance in the first few days and parents’ natural response is to help them out.
In the long run, not giving them anything more will teach them a valuable lesson and be more beneficial for them. So if they run out of money before their next allowance is due, there need to be consequences – just as there would in the real world. Rather than giving them more money, try asking for small jobs in return for additional sums or even giving a “loan” against the next instalment.
2. Get them involved in family shopping
The LifeSkills Youth Barometer research found that three in five young people prefer to live hand to mouth rather than keep any kind of budget. But this style of money management could have consequences in later life as they try to save for a deposit and work to stay out of debt.
One way to demonstrate the need to budget is asking them to help with the family shop. Try giving your children a shopping list and a budget and let them get everything you need for the week. You can give advice, but try not to interfere too much – and be prepared to cook with some different items from what you’re used to!
3. Know your terms
More than a third of 14-25 year olds don’t know the correct meaning of APR in relation to interest charges on loans or credit cards, according to the LifeSkills Youth Barometer.
It also found that more than one in four don’t know that a lower APR is more attractive than a higher one. These are important terms to understand as interest rates vary hugely, but the lower they are, the better. There is plenty of information out there that can teach the basics on financial terms.
4. Encourage Saving
Saving money can seem like a chore to anyone but getting into strong saving habits early will stand you in good stead later on. With nearly two in five young people not being taught money management skills including how to save money, it’s essential to encourage saving and instill its importance early on. One way to do this is to incentivise, so, next time your teenager wants the latest gadget, explain they’ll need to save for it and that every pound they save you’ll match.
5. Beware of short fixes
Knowing what to do is one thing, but knowing what not to do is be equally important. Store cards and payday loans can be tempting to anyone, but especially those that don’t understand the reality of them.
It’s important to remember that credit cards are not free money… far from it. In fact, credit cards can be quite an expensive option as you also have to pay interest on the money you borrow.
Our research shows that three in five young people do not know how credit cards work, so the next time you’re kids ask to borrow some money try using this as an example of how interest works. Once you have lent them the money explain to them that, not only will they need to pay you back in full, but they’ll also need to pay off any interest in chores. It may make them think twice about how badly they need the money!
Kirstie Mackey is head of LifeSkills at Barclays