Parents play a central role in their kid’s development of good habits – whether it be polite behaviour, healthy eating or safety. It is now time to extend this to their attitudes towards money. There are some simple ways that parents can improve their children’s financial capability.

Use everyday experiences to turn saving into a habit

Social norming is a powerful behavioural tool that influences a large proportion of our decisions.

From a young age parents tell children to abide by social norms. “Don’t speak with your mouth full”, “look both ways when you cross the road”, “always say please and thank you”. In time, they follow some of these instructions and they may even turn into habits.

Why not start a new one – “always save 10%”?

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Create a feeling within the household that saving is normal and saving will become a force of habit. In the same way as saying “thank you for having me” when they leave a friend’s house.

Little and often is the key. Saving 10% should help to forge good financial habits without being a burden on their ability to spend money on ‘fun stuff’.

Bring this to life by using some of the attractive savings products available for young people. Some interesting examples include:

• Junior ISAs are available with interest rates of 3-4%p.a.
• MetroBank have a ‘5 for 5 Club’ – if you take your child to the bank to deposit savings, as little as £1 a month, every 5 months they will award the account £5.
• Halifax Kids’ Regular Saver account, where if your child saves £10 in most months they will receive a 6% p.a. interest rate.

After a few years of contributing into a savings account, their effort will be tangible due to a meaningful cash sum. They will also begin to feel the benefits of compound interest. Albeit on a small scale.

Explain how good things come to those who wait

We are a consumption driven society and place far greater importance on our current self, over our future self. We want to have things now. So asking your children to save for savings’ sake will be a tough ask. Instead, encourage them to set short-term goals and budget to meet those goals.

For example – if they ask for a new gadget (or similar), go through a goal setting exercise with them. First talk to them about costs and time scales, the more expensive the goal the longer it will take to achieve. Based on this agree what a reasonable contribution from them should be. Perhaps for two months they agree to save a certain amount per week from any money they earn (or pocket money). For younger kids, bring it to life by making a savings jar with a picture of the gadget on it as a reminder of what they are working towards. Finally, ask them to keep a record of every deposit so they can track their progress.

This exercise illustrates the concept of goal setting and budgeting and may help to combat the expectation of immediate gratification.

Take the lead by showing them why and how to budget

Children are hardwired to learn from and copy their parents. In recognition of this parents change their behaviour to influence their children’s language, manners and safety. But, currently, not enough is done to positively influence attitudes towards money.

There are aspects of your finances you may not want to share with your children. However, you should be open about your efforts to plan and budget. Openly discuss financial compromises you have to make. For example – “I bought [x] over [y] as it was better value” or “if we don’t spend as much on [x] it can go towards our holiday to [y]”. If you articulate the process for deciding how much to spend and save (for short term goals or long term expenditures) this will feed through to your children’s attitudes towards savings and spending in future.

A great example of day-to-day financial planning is a family’s weekly shop. One day, give yourselves a fixed budget for lunch that day and ask your kids to choose from some different options. If they choose roast chicken with all the trimmings, maybe there isn’t enough money left over for a dessert. But, if they choose a sandwich they can also buy crisps, a juice and still have money left over (perhaps this can go in their savings pot when they get home).

It will be useful for them to understand the balancing act of budgeting when they become responsible for their own expenses.

These are just some of the ways you can give your children the tools they need to take control of their future financial wellbeing.

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