Start early to form your child’s ‘financial personality’ so good habits with money can last them a lifetime

GROWING UP I remember loving my money box – a pink ceramic bunny with bicycle. It must hold some significance for, broken ear and all, it still resides in my parents’ house among other treasured possessions that I’m sure they’d much rather be rid of. I remember also the pride I felt when I opened my Henry Hippo account and received the eponymous money box.

So I was probably a bit of a nerd but perhaps my parents had better money sense than many. They worked hard, put some away, gave some to charity and when they had extra, they treated us. They also encouraged us children to do the same. Now, as a parent myself, bombarded with the temptations of city living, I am beginning to see the value in instilling good money sense in my own children.

While a three-year-old might not have a clue, a five-year-old may start to notice the prices of things and may begin to grasp that a house costs a lot more than a scooter. As the child becomes more mature we can begin to introduce simple money ideas without overwhelming them.

Trips to the supermarket can provide opportunity for them to learn how much things cost. The introduction of pocket money can teach them that they can buy a few sweets this week or put the money aside and get a comic next week. Parents can begin to explain the concept of working to earn money and that without work there is a lot less to spend. The opening of a savings account can introduce the idea that saving isn’t like a sprint but something more like a marathon.

Carol Dunne, national development officer of community education with Money Advice Budgeting Service (MABS), says that it is important to teach children about money because as members of the family they are affected by that family’s money situation. “By not discussing money, it is harder for the money manager in the family to tackle the tough choices,” says Dunne. “It’s more difficult to say ‘no’, it’s more difficult to say ‘wait’, it is more difficult to get family members to understand economy drives that might need to be undertaken in the household.”

Secondly, she says that as adults they will eventually need to manage their own income and won’t know where to start if they have not been taught at home.

Dunne says that every day situations provide opportunities for teaching about money. “If shopping with children,” she says, “instead of having them add items that catch their eye to the trolley, let them bring back items from your list and tell you the cost, involve them in comparing price and value. Let them look at bargains with you and teach them how to work out whether an offer is the right one for you this week.” She recommends making them aware of some of the bills and letting them know that the money coming into a household is finite and that certain expenses need to be prioritised.

Emma Kennedy is author of Megan and the Money Tree – a terrific resource for parents and educators. The book contains an easy-to-follow allegoric tale about Megan and her parents who make money selling apples until their apple tree blows down. The children’s chapters are followed by chapters for parents in which simple questions and activities are suggested to introduce basic money ideas to kids.

Kennedy says that teaching children about money is a life skill akin to teaching them road safety or healthy eating. She says that it is important to do this at an early age because by the time the child reaches their late teens they may already have expenses and a part-time job. Essentially, by that stage their “financial personality” is already formed.

“In the same way that you don’t need to explain in-depth about cancer if someone in the family is ill, you don’t need to go into a huge amount of detail,” she says. “But money matters shouldn’t be a taboo in a family. You need to show children that money is something they should control rather than allowing it to control them.”

Dunne agrees: “There is a balance to be struck between giving children or teens a cause for anxiety and making them aware. It is a good idea to involve them in ways that are appropriate to their ages and their own abilities, always in keeping with how any particular family lives.”

Kennedy says that giving your child an understanding of money – that it can be earned, that it can be wasted, that it is a limited supply, that unexpected things can happen financially or that saving is a good idea – can also help them to understand better if a parent loses a job or the family finances are diminished.

Last year Ulster Bank published a report which found that Irish families are talking more about money. It found that 95 per cent of the parents of teenagers felt that money matters should be taught in schools.

While Kennedy does not believe that the school curriculum goes far enough when it comes to teaching money sense, Dunne says that MABS is regularly contacted by teachers seeking support and resources to help them with students. She believes that “it would not, however, be a quick fix, to simply create a new module, in the belief that we could tick a box – the learning must also happen at home and continue throughout life”.

Pocket money can provide an opportunity to teach kids about money management, though Dunne says that placing rules on pocket money (such as saving half of it) may be a good idea.

She says that younger children can obtain a great sense of pride in paying for something with money they saved. She advises that it is up to the individual family whether or not to draw the connection between household chores and pocket money.

TEACHING KIDS BETTER BUDGETING

RESOURCES AVAILABLE FOR PARENTS:

* Megan and the Money Tree by Emma Kennedy is available in some local libraries and from Orpen Press priced €6.99. www.orpenpress.com

* Pocket Money Magazine by RBS/Natwest can be viewed online at rbs-pocketmoney.co.uk

* Cyril the Squirrel saving stamp scheme at the Post Office and its National Young Savers Award. Enquire at your local post office or visit cyril.anpost.ie

* Pocket Money Tracker from MABS is a basic document which can be personalised with the child's name. MABS has launched a new parenting item on its website – mabs.ie

* Penny Wise Spending Diary and the Helping Hand at Home Planner can be ordered online or through the MABS helpline (0761 072 000). Their pamphlets Cash Conscious (which will soon be replaced by a resource for second-level students) and Get Smart with your Money are presently at local MABS offices.