How to have the awkward conversation – no, not about sex

Iona Bain

It’s that awkward conversation many parents dread — no, not about sex, but money. It is one of the most valuable discussions you can have, but a worrying number of parents shy away from talking about financial issues, according to research for Times Money. About half of these parents believe that they don’t have the knowledge or the confidence to pass on financial wisdom, while a quarter say they don’t have time.

The survey, by Experian and the Personal Finance Education Group, found that most families believe schools should be doing more to enlighten the next generation. Personal finance became a compulsory part of the curriculum in 2014, but only for those children in maintained secondary schools.

Academies and free schools, heavily championed by the government in recent years, do not have to follow the national curriculum; this could explain why only 26 per cent of pupils received lessons on money last year.

Here are ten tips for teaching your children about money.

Primary-school age

■ Explain what money is
Children form financial attitudes by the age of eight, according to research from Cambridge University. Start the ball rolling by getting your kids to count the coins and notes in your purse, says Michael Mercieca, the chief executive of the charity Young Enterprise. “Talk about the different sizes, colours and numbers on them, and how many different coins and notes there are.”

Explain that money is a currency that we all need to pay for things. Lynn James, the founder of the Mrs Mummypenny blog and mum of three boys, says: “It’s important to understand the value of money. I always explain how much things cost, from a pair of football boots to the mortgage. It puts thing into perspective.”

■ Discuss the world of work
Understanding the connection between working and money is vital. Mr Mercieca says: “Talk to them about where money comes from. We’re an increasingly cashless society, and thanks to cashback it’s easy for children to assume that the supermarket is the source of all of your funds. Showing your child your payslip and explaining what you had to do to find employment is helpful.”

Ms James says: “I am open about how much money we earn as a family and explain how different jobs can earn different amounts of money.”

■ Earning is learning
Children aged between 8 and 12 should earn their own money by doing simple tasks such as dusting and washing the dishes. Alex Zivoder, the chief executive at the children’s debit-card company goHenry, recommends setting a base rate and then operating a “pay by chore” model.

“If they accept a task, set them a deadline. If the work isn’t done, make sure you explain that they only get the money if the work is done and give them another chance to do it.” As a guideline, the average weekly allowance for an eight-year-old is £4.44, rising to £5.22 for nine-year-olds and £5.65 for 11-year-olds

■ Start saving
Set up a savings account for your child and make sure they are involved from the start. Coax them into saving at least 10 per cent of their weekly allowance. To boost the habit, you could offer them 50p for every £1 saved. Ask them to write down their spending goals; do they know how much they need and how long they would need to save for? And don’t talk down saving, even if interest rates are meagre. The personal-finance charity MyBnk reckons that if your child saves £3.75 a week, from the age of seven, at 4 per cent interest they would have £1,600 in the bank by age 15.

Angela Cork, who runs Ringwood Fabrics in Hampshire, has her sons Sam, 15, and Merlin, 11, helping out in the shop, and cashing up at the end of the day and pays their pocket money into the online bank account GoHenry.

“If Sam goes to the cinema with friends, I like the fact that my phone pings and I can see when and where he’s using his card,” she says. “One of the best things is you can set tasks and goals, which if they achieve they can see has earned them money.

“If they are nice to their brother, if they unload the dishwasher or keep their room tidy, I can reward them. One day Sam was particularly helpful round the house, painting and clearing out. I sent him a fiver which came up on his phone with a message saying thanks for your help today.

“They also think a little more about whether they want to get that great big popcorn thing if the cost is there in black and white on their phone.”

■ Don’t do handouts
Once you have settled on an allowance, don’t waver. Mr Zivoder says: “If you give kids top-ups when they run out, they may feel they can spend their pocket money, knowing that they’ll get more. Making choices and learning to prioritise is important. Help younger children to consider which option is best.”

Sharan Jaswal, the education director at MyBnk, says: “Parents can ask their kids: ‘Would you rather have four treats now and none for the rest of the month, or one four times a week?’ Stick to your guns and repeat the lesson, “ he says, adding that you should leave the door open for children to negotiate a higher allowance if they can make a worthy case for it.

“This is a good way of preparing them for workplace salary negotiations.”

Secondary-school children

■ Get budgeting
Once your child reaches secondary school, they should be allowed to spend their monthly allowance however they want, but make sure they can pay for necessary expenses, such as lunches etc. They should be in the habit of tracking their monthly income and outgoings (including savings). They should also write down how much they want to spend on discretionary items or projects they want to save for.

Wean them off the Bank of Mum and Dad
Mr Zivoder suggests switching from paid chores to a proper part-time job outside the home as children get older. Paying the allowance only once a month will provide an extra nudge. Encourage your kids to use their skills and pursue their interests.

Give them financial responsibility
Involve your kids in the weekly shop and get them to choose the best-value items you need. You could give them any of the money left over as a reward if they come in under budget.

Mr Mercieca also advises looking at utility bills together, to explore the cost of running a home. Teenagers could even be tasked with switching your utilities online.

Vivi Friedgut, the author of Money Smarter — A Family Guide, says: “Encourage them to look at all elements of switching, and foster critical thinking by getting them to read the small print.” Include them in conversations about buying big items, such as a TV. Mr Zivoder says: “Get them to do the research and discuss the things to consider when making a purchase.”

■ Get down to specifics
Ms James advises explaining the difference between renting and mortgages. Youngsters can start to save into a Help to Buy Isa from the age of 16. Parents shouldn’t be afraid to discuss the basics of investing either. “The concept of a share is the simplest to explain,” says Mrs James. You might even want to talk to your school about entering a school share competition, such as shares4schools.co.uk.

■ Tackle debt
Young people heading off to university can be bamboozled by easy credit. Ms James says: “No teenager should think of a credit card as ‘free money’. Talk to them about the costs in terms of interest and how it must be paid back.” Explain why payday loans and gambling are bad news. Ms Friedgut says: “The sooner young people learn of the dangers, the better.”

Best money websites for juniors

Your kids are growing up in an increasingly cashless world, so don’t fall behind the times.

It might make sense to use an online piggy bank such as Qwiddle (qwiddle.co.uk). You can set paid chores through the site’s dashboard, deposit money safely into your child’s account using PayPal and let them set their own saving goals. Only you are allowed to authorise their spending in vetted online stores.

For older kids, Osper (osper.com) is a handy debit card and budgeting app rolled into one. The advantage for parents? They can download the app and send money to their children’s debit cards on the go.

Kids of all ages can top up what they’re learning at school through the Top Marks (www.topmarks.co.uk) website. It provides interactive money games and links to helpful external resources, notably the Counting on Money programme, sponsored by the Nationwide building society.

If you want your children to learn more about the stock market, the Fantasy Stock Exchange (fantasystockexchange.biz) is a fun and informative website that turns investing into a competition; winners receive a £250 voucher to spend at Hamleys.

RoosterMoney (www.roostermoney.com), a similar service to Qwiddle and Osper, also offers an addictive virtual game, Rooster Village, where players can earn “Roosties” for completing challenges that teach them about money.

 

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