As if the financial impact of a global pandemic wasn’t enough, the UK and wider world are now in the midst of a cost of living crisis.
Everything from energy bills to a loaf of bread is on the rise, so the importance of saving for your own future as well as teaching your children how to save for theirs has never been more important than it is now.
But if you held out a sweet and asked the average 5 year old whether they would like to have this today or wait and have 2 tomorrow, chances are the sweet wrapper would already be in the bin (or on the floor) before you’d even finished asking the question.
That’s one of many reasons why it’s important to start talking to your children, appropriately and engagingly, about finances from an early age. You’ll be helping them to develop a healthy relationship with money, especially at a time when family budgets are being stretched in ways that money is going less further.
One way to do this is to involve them in basic financial decisions, whether that be setting and adhering to a budget when shopping, demonstrating to them the importance of being guarded against impulsiveness when considering a purchase or putting money away in order to reap a greater reward at a later stage.
“When parents model good behaviours early on, kids get the message that being smart about money is part of growing up” – Child Mind Institute
Pocket money has traditionally been a way for parents to encourage their children to learn how to be responsible with money and how to spend, budget and save. The key to this is helping them understand how they can split that money into some they can spend today and some that isn’t flexible and should be saved.
There are many ways to help children understand that crucial difference, perhaps by showing them regularly how any money they’ve saved is growing in a savings account or even something longer term like a SIPP.
Setting short term goals such as saving enough for a new game or toy will help them to realise the benefits of waiting for that reward but also give them the option to keep saving for a much bigger one
But all that said, it’s just as important to allow children to make mistakes with money and learn from the consequences too. So, if your 5 year old wants a sweet today instead of 2 tomorrow, let them. One day they might surprise you and be happy to wait instead.