On each day of our Learn Money Week financial education campaign, we will be featuring a guest blog from key stakeholders, i.e. the people who collectively help achieve financial literacy.
Today we present the thoughts of Sarah Crown, Editor of parenting website Mumsnet.
There’s no doubt that parents are feeling under real financial pressure these days: when you’re raising a family at the same time as contending with stagnant wages, rising living costs and some of the highest childcare fees in Europe, success can often mean simply staying afloat. In such a testing climate, parents are more aware than ever of how crucial it is to pass on healthy financial attitudes to their children – but for many, there are a raft of questions that need to be answered before they can begin.
How do we teach our children that money doesn’t just magically appear? What’s the best way to encourage them to see the rewards of saving and spending responsibly? And when do they really need to learn about banks, loans, credit cards and interest rates?
It’s no easy task, especially given that half of what children learn about money will take place through observation rather than direct instruction. When it comes to cash, our actions speak just as loudly as words; if we ourselves are constantly overspending or obsessively saving, it’s highly likely that our children will model the same behaviour when they grow up.
Understandably, many parents don’t want to ‘let on’ to their children that the family’s basic lifestyle – let alone treats and plans for the future – is afforded through stress or sacrifice. But avoiding the subject can be counter-productive. Just as it’s unwise to bury your head in the sand when the bills arrive, so it’s better to educate your children from the get-go. From as soon as they’re old enough to understand, it’s worth explaining that money isn’t magic stuff that just ‘lands’ in bank accounts, and that credit cards aren’t a way of getting what you want, when you want it, with no repercussions. Our children need to be taught how to save – and equally, how to spend.
Saying no whilst under siege
It’s hard work, and our users are quick to realise where their efforts are being undermined – whether through marketers selling ‘must-have’ toys at hyper-inflated prices, or, as we are increasingly seeing on Mumsnet, online games companies pushing in-app purchases at young players. In addition to developing an eagle eye for small print, Mumsnetters describe having to become experts in the art of saying ‘no’ where needed, and finding age-appropriate ways of educating or reprimanding as their children learn that careless spending has its consequences.
Without doubt, one of the most popular methods of encouraging money consciousness in children is through pocket money. Every family is different, but at whichever age you decide to introduce this as a tool for children’s learning, you’re introducing that same notion of spending control: if children earn or save their money, it’s theirs to spend on whatever they choose.
It’s important to be clear on what pocket money covers, and not to give in if they spend without thinking and come asking for more, so that they learn that once it’s gone, it’s gone. In the long run, they’ll be developing the skills to make decisions and prioritise, and they’ll get a buzz from being able to buy for themselves the reward they really want. We know from our users that this lesson is often applied across the board, so that if children receive money for Christmas or birthdays, they’re encouraged to put some to one side and make a proper decision on how it should be spent.
The next step – opening a bank account for you children – can feel like a serious one, but when the reach the age of seven or eight, it can help them get used to the idea of banks as a place to save. While every bank has an option for children, what’s clear is the need for responsible measures to offer added protection. Accounts for children should not allow direct debits or standing orders, and need systems in place that flag irregularities up, preventing children from becoming overdrawn or incurring charges.
Where a system has these checks and balances in place, we’ve found that a growing number of Mumsnetters allow their children to have debit cards. Many parents feel that it teaches children how to budget and engenders responsibility about money, as well as being a good opportunity to touch upon subjects such as interest. If children can comprehend that the money you keep in the bank is actually lent to the bank – and, in return, the bank pays you to borrow it – they’re likely to be more ‘switched on’ to some of the jargon and small print as teens and young adults.
Sarah Crown, Mumsnet.