Is your family financially-savvy?
Do you discuss financial matters with your children? In the UK, we can be very reticent when it comes to having family conversations about money. But as our children grow, they need to know the financial basics in order that one day they can successfully manage their own money.
So, knowing how to draw up a budget and what should go into it, how interest rates affect the amount of money you pay back on a loan or mortgage, and how compound interest can help savings grow, are all good life skills to learn at an early age.
Starting the conversation
Data suggests 58%1 of parents report finding it difficult to talk to their children about financial matters. One of the main reasons parents give is that they feel children shouldn’t be burdened with adult responsibilities, like concerns about money. It can in fact be very empowering to give your children the skills and confidence they need, so that they don’t face money worries in the future.
With so many financial transactions now carried out by the swipe of a card, gone are the days when parents could use a shopping trip as a chance for children to learn about how much things cost. So, it’s more important than ever that children understand from a young age that money is finite and sometimes hard choices have to be made in order to keep within a sensible spending limit.
However, there are practical ways to encourage children to save, such as a Junior ISA, which gives children the opportunity to see how a savings account operates, and how their money can grow over the years. Explaining how much family treats such as holidays cost, and how they are budgeted for, will give a child an understanding of the rudiments of money management. When interest rates rise, explaining to a child what the implications are for your mortgage and the family budget will help prepare them for the day when they take their first steps on the housing ladder.
1The Money Advice Service
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.