Parents have a lot of things to think about these days. As life gets in the way many parents forget to teach their children the basic principles of money. Financial planning plays a crucial role in all our lives, especially when talking about our children’s future. As the saying goes, “money can’t buy you happiness” but it can definitely help! Without money we literally cannot survive nor can we do the things we love to do. Many parents avoid discussing money with their children as they feel they are either too young or immature to understand the nature behind it. Parents have the responsibility to educate their children on how to be financially savvy and how to save and spend wisely.
While it is not encouraged to pass off money stress to children, it’s a smart idea to discuss how to budget on a weekly or monthly basis. The more you openly talk about things, such as saving for holidays or paying the television bills, the more opportunity you have to provide your children with relevant information on the cost of living. Recent reports reveal parents are starting to take out loans in order to fund their children’s education. This can 100% be avoided if you take action early and set up a savings account. By opening up a savings account when your child is a new-born this will allow you to prioritise education before these costs end up becoming a financial burden to you and your family.
It is estimated that it costs €584 a year to send a child to primary school, and €1,236 a year for secondary school if you levy third level education costs ranging between €20,000 to €40,000 per child on average, this is a significant amount of money and for a lot of children they have to fund some of the third level education costs by working or going into debt.
Tips to help your child to become financially savvy
Let them open their own bank account
By allowing your child to open their own bank account it shows you trust them to manage their own money. Younger children can benefit significantly from learning about the importance of saving and keeping money in a savings account. By educating children from a young age, this will hopefully follow them to adulthood and encourage them to make better financial decisions. Offering children a place to save and keep their money, while learning about the important skills of money responsibility, saving and social skills, seem like a no-brainer.
Allow them to spend their own money
Children see their parents spend money all the time, which unfortunately does not provide them with the same advantages of a hands-on experience with spending their own money. Many professionals believe that by allowing your child to spend their own money on expenses (communion or confirmation money), such as a treat in the shop or pay for their own cinema ticket propositions them to become a productive decision-maker in the future. This is the first step in your child being able to understand the difference between profit and revenue. Of course, mistakes will be made along the way but it’s better to happen now when trying to decide what chocolate bar to purchase rather than later on down the line searching for the best mortgage deals.
Get them a piggy bank they can’t open
Encourage your child to put €5 to €10 a week into a savings piggy bank but ensure it’s one you can’t open without breaking it; this reduces the temptation to sneak the odd fiver here and there. At the end of the year, they could save up to €500, which will show them the benefits of saving over a long period of time. The piggy bank will also get your child into the habit of saving regularly, spending often but not too much, making their own purchases and focused saving for small goals will instil financial discipline in children. This will show them how to manage their personal finances better as adults but will also allow them to handle crises or emergencies with greater composure.
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