As UK households struggle with the sharpest annual rise in the cost of living since the 1980s, it’s important that we talk to our children about what’s going on. After a turbulent two years, families are now faced with soaring energy bills, a National Insurance tax hike, rising food prices and an interest rate increase.
While perhaps a daunting subject to approach, the current crisis provides the perfect opportunity to start conversations around financial education, the better to equip the next generation with the tools needed to navigate periods of economic hardship.
Parents might think teaching kids about finances is a tricky task, but there are simple and practical ways to start. The benefits are that children learn about the rising cost of living and how it affects them, but also gain essential money skills to prepare them for the adult world of finance.
Use pocket money as an incentive
Giving pocket money for tasks that positively impact household bills not only helps you, but will help your children learn more about the value of money and what it takes to earn it.
Chores could be anything from washing up to checking all the lights in the house are turned off before bed. It doesn’t matter how much you give – it can be as little as a few pence – but the act of regular payments opens up the topic of money, and gets children thinking about the key pillars of money management: spending, saving, earning and giving.
Set a good example
Children learn money habits from parents, so try to set an example with your own finances. You can get your child involved with small day-to-day financial decisions like checking a receipt after your shop, checking for hidden charges online or putting small change into a piggy bank. Taking your child shopping is a great way to teach them about budgeting. Ask them to keep a running total of the items you buy and explain why you might choose certain brands or items if they allow you to save money.
Don’t forget the basics – and make it fun!
Teaching basic money habits through fun and educational games will help children grasp financial concepts in a safe and engaging environment. You can even use Monopoly to teach them about investing! It’s all a learning process and letting them make mistakes is part of it. Kids are better off making a £20 mistake aged seven than a £2,000 mistake aged 27.
Boost their entrepreneurial spirit
If you’re not in a financial position to give your child pocket money, encourage them to earn extra money for themselves. For older children who don’t already work at the weekend, boost their entrepreneurial spirit by getting them to think about ways they can earn extra cash. They could offer to wash a neighbour’s car or sell some old clothes or toys in an online marketplace.
Get kids involved with the bills
With utility bills increasing, now is the perfect time to show children how household bills are calculated. Explain what the numbers on your energy meter mean and how small decisions around the home can impact this number and your monthly bill.
Ask them to turn off the TV, their games console and lights to see how the numbers move. This will help you save money in the long run and make your children aware of the impact of their actions.