How To Make Your Child A Money Maestro

We’ve all been there at the supermarket checkout. Someone else’s child is red-faced on the floor screaming for sweets and we’re thinking to ourselves, at least it’s not me this time. In the face of the unstoppable force of a child’s pester power, parents either give in to keep the peace or resort to that time-honoured tradition – reminding their children that “money doesn’t grow on trees.” After all, the concept of money can be difficult for any young child to grasp, especially if they believe that cash sprouts magically and endlessly from the nearest ATM.

But it is possible to teach children about financial matters and instill in them sensible money habits that will last a lifetime. Indeed research shows parents can shape their children’s attitudes towards financial responsibility from as young as three years of age.

Few experts would advocate sharing concerns about the family’s finances with a child, but when it comes to money, parents do need to lead by example, according to Frank Conway, director of Moneycoach.ie, an independent financial advisory service, and co-author of Cents and Sensibility, a financial guide for teenagers.

“Respect for money has to be embedded in children as early on as possible,” says Conway with his colleague and co-author Sinead Ryan gives short tutorials about personal finance at secondary schools. “Just like teaching manners, parents need to teach by example.

“In some cases, parents give in to children’s demands at every juncture. Parents need to move away from that and show children that money needs to be managed.”

Because children are watching and listening, it is not enough for parents to talk the talk – they’ve got to walk the walk, too. If they see you spending money without a care in the world, they will copy you.

Fortunately, they are also likely to mirror your actions if they see you budgeting, shopping around for bargains, and regularly saving money for a rainy day. Conway recommends giving pocket money to children to introduce them to the concept of money management and budgeting. Deciding not to allocate an allowance can be a false economy, because research shows that children who don’t get pocket money still manage to tap their parent for the same amount of money over time as children who get a weekly allowance.

It is best to agree a plan for what children need to do to earn their pocket money. According tosome parenting philosophies, paying for children to do regular household chores is foolish because as members of a family they should be helping out around the house anyway. By getting them to earn their allowance by doing additional tasks, such as mowing the lawn or washing the car, parents can awaken a more entrepreneurial spirit.

Conway is adamant, however, that once that allowance runs out, parents should not give in to demands for more.

Parents should also help their children divvy up their allowance for spending and saving and help them list the items they want to spend their money on. By allocating money this way, they learn about the cost of things, how to budget for them, and how they cannot afford to buy everything they choose.

Naturally, parents can be concerned that children will spend their entire allowance on unhealthy treats, but this can be mitigated by getting them to save for something they want to buy in the future. For example, if your child gets pocket money of €6 a week, agree that €2.50 must be saved for bigger treats or Christmas presents and that the rest can be spent that week.

One of the easiest ways to help children learn about savings is to open a deposit account for them and show them how their savings are growing each month and what interest they are earning.

However, encouraging a seven-year-old to save for their college education is not likely to reap many rewards, Conway believes.

“With kids, savings goals need to be short term, because they don’t think about the long term,” he says. “But the importance of saving some of their money instead of blowing it all does need to be verbalised”.