As parents, we want our children to have healthy and happy lives. Poor financial literacy is a recipe for poor financial health later on in life. According to the Money and Pensions Service, children's view of money can set by the age of seven, so your child's attitude about money is the basis for their attitude to money in adulthood.
Teaching children about money does not have to be dull or daunting. Using food-based scenarios to help children learn about money is a good way to engage children in a fun and tangible way.
TEACH BUDGET-SETTING THROUGH MODELLING
Helping children to understand budget-setting is a life-skill that puts them in control of their money now, and in the future.
Talk to the child about the family's weekly food budget and involve them in making a shopping list. Tell them the spending limit for your shopping trip. While shopping, talk to the child about why you have made some food choices to keep within budget (for example avoiding impulsive buys, buying supermarket brands instead of big brands, making substitutes etc). You can involve the child in comparing the prices.
This is a good opportunity for the child to use real money if you decide to pay by cash. In this digital age, it is important to embrace all the technical advances that help us manage money (e.g. budget planners) but also provide an opportunity for children to see the value of money.
TEACH PROFIT & LOSS
Teaching children profit and loss helps them understand how people gain or lose money. This is also a great way for children to practice their maths skills; adding, subtracting, multiplying and dividing.
Set up a pretend restaurant or lemonade stand as a family or with a group of their friends. Guide the child on how on to calculate the cost of making the food or drink and how to calculate profit made on each item.
TEACH ABOUT SAVING
Saving is a tool that empowers children to be financially free. It also teaches children that they can set goals and achieve them. Furthermore, teaching children how to save, develops their decision making skills.
Saving should be a fun. Remember that the ability to delay gratification can be learnt, so set age-appropriate challenges.
Ask the child to choose a special friend or family member they would like to make a birthday cake for. Support the child in writing a budget for making the cake, and the amount of time to save that amount. Agree an amount (this can be an opportunity for older children to practice fractions) they will save from their pocket money until they achieve their goal. Remember to celebrate each saving milestone with the child.
TEACH ABOUT PLANNING
Teaching children about forward planning develops their organisational skills and the ability to manage what they have to reach their goal. This life-skill can be built during childhood.
Set some time aside to plan a week's plan with the child. Engage the child with helping to write out the necessary ingredients for the week.
Talk to the child about how left-over food could be properly stored to avoid wastage and therefore save money. This is a good opportunity to introduce the concept of planning for a rainy day and through discussion, help them relate this to why it is important to set money aside for now and the future, as things may not always go as planned.
Discuss ways that left-overs could be used up and how this saves money. For example, the left over mash potatoes can be used to make Bubble and Squeak. For older children, they can compare the cost of a take-away version of the meal and calculate how much money was saved.
TEACH ABOUT THE POWER OF COMPOUNDING
Compound interest is earning interest on your savings, and also, eventually, on the interest that those savings earn. Teaching children about compound interest develops patience and delayed gratification.
Give the child 1 marshmallow. Tell the child that if they can resist eating the marshmallow for 10 minutes, you will give them 1 more marshmallow. Challenge the child to resist eating the 2 marshmallows for another 10 minutes. At the end of the 10 minutes, add another 2 marshmallow. The child should end up with 4 marshmallows at the end of 20 minutes. Guide the child to reflect on the fact that they were rewarded with more marshmallows the longer they delayed their gratification. This is how compound interest works; when you leave money unused in a savings account for a certain time, your money grows and the growth gets quicker.
The key to teaching children about money is consistency and fun!