Every Irish child has at some stage heard an exasperated parent saying, “You know, money doesn’t grow on trees”. You may have even used it yourself! While it is a valuable lesson for a child, there are many ways we can guide our children to help them understand money and put them on the right path to managing their money wisely.

Here are some ways that you can help your kids with their financial futures. As the lessons apply to different age groups, we’ll start with a few for children who are still at a very early stage in their financial lives.

 

1. Establish a savings routine

This can start as soon as children start to receive pocket money. Encouraging them not to spend it all as they receive it and instead to save for a bigger treat to be bought every few weeks or months can set in place the benefits of delayed but ultimately greater rewards. We all know the benefits as we’ve got older of saving for holidays and cars instead of borrowing and paying back far more than the actual cost.

 

2. If it looks too good to be true, well it probably is.

While we all may associate this only with a “great” share tip that eventually turned into a very expensive lesson, this is a useful lesson for children too. My nephew recently bought a 1,000 piece jigsaw from a friend of his for only 20¢ and was delighted with himself. That was until a few days later that he found the last four pieces were missing…

 

3. Look after the pennies and the pounds will look after themselves

Another old saying that many of our parents used but it's also one well worth remembering and passing on to our children. This tip is all about small amounts eventually making a big difference, teaching children the value of not getting complacent and wasting what seem like insignificant amounts of money to them.

 

4. Beware borrowing

It's important for children to understand debt. The line from Hamlet of “Neither a borrower nor a lender be” is probably not the best advice for kids as they grow up today. After all, they’ll probably need a mortgage one day and using debt can sometimes deliver savings – for example where there is a significant discount for paying a full year’s subscription in advance.

However children need to learn to plan debt carefully and to avoid expensive debt, particularly to avoid buying impulse purchases using credit cards that they won’t be able to immediately pay off.

 

5. Share our own mistakes

Now here’s one to test us all! We’ve all made mistakes over the years. Maybe we ended up overweight in property before the economic crash, maybe we didn’t get proper independent financial advice early enough in our lives.  Tell your children about lessons you’ve learned and how they can avoid making these same ones themselves.

 

6. Make companies fight for your business

Your children need to understand that they have real buying power in relation to a lot of the products and services that they purchase. They offer the potential of being very long-term customers, the types that brands really want to attract. So whether they are opening a bank account, booking a hotel, getting car insurance, buying a car, some electronics or even just clothes, they should get into the habit of making sure they get the best price by haggling. 

 

7. Plan your financial future

This is probably the most important lesson of them all… Financial planning shouldn’t start when people hit their forties and start worrying about retirement. Financial planning should start at a very young age; when children are thinking about all the things they want, but can’t afford! Choices have to be made, careful decisions need to be taken and a plan needs to be put in place to manage their limited resources to achieve the maximum effect and/or enjoyment.

 

8. A bank’s job is to sell to you

Banks are a necessary service provider for everyone, and your children will need one (if they don’t have one already). But children need to understand that banks don’t provide their services and products for free. At the end of the day they have shareholders who want to see a return. That return is achieved by selling products to all of us – loans, credit cards, investments, insurance.

Children need to learn to separate the necessary services banks provide (current accounts, mortgages, deposit accounts) from the other optional products that they might try and sell them.

 

9. Fund your pension early

Every 10 years earlier that you start a pension, your fund approximately doubles. So children need to be taught that pensions are not for old people! They are for savvy young people who have planned their financial futures and who want to make their financial objectives throughout life easier to achieve.

 

10. Get cover while it’s cheap and accessible

Life assurance, income protection and other such products are much cheaper and easier to get (younger people are healthier, underwriters take a more benign approach) so young people should get cover in place early. They should look potentially at convertible policies that they can maintain cover on, off into the future. These could be very valuable, particularly if they are unfortunate to suffer from ill health as they get older.

 

There are lots of lessons we can teach our kids, and lessons about money are useful to help guide them through a complex area of their lives.