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04 April 2023 11h20
Source: Banco Carregosa

7 ways to help children deal with money

7 ways to help children deal with money


Childhood habits can last a lifetime. So teaching young people how to manage money will help them become informed, confident and independent adults who can manage their finances with ease. And the sooner you start, the better. Discover 7 tips which can easily be incorporated into everyday family life.   



1. Set the example  


This is the most important tip for helping children deal with money. Children learn more from what they see and less from what they are told. It is important that they see their parents saving, investing wisely and participating from an early age. Try to explain why you have made a particular choice, talk openly about the family’s financial situation using age-appropriate language, but without being childish. If you act as a role model, your children will be more likely to do the same when they are older.  



2. Promote the habit of saving


Learning to save is more than just a basic financial habit. It also teaches discipline and goal setting. So help your children develop this habit. It’s also a way to helping them see money as something to be saved and cherished, rather than something they can spend right away. Every time they put a little money aside, don't forget to reinforce the moment with positive phrases and a positive attitude. If you make the habit enjoyable (rather than making it cost something), the more likely they will continue doing it for the rest of their life.   



3. Teach children to manage a budget   


It is important for children to learn how to deal with money from an early age. Managing a 'budget' – an allowance or pocket money appropriate to what they spend – has more impact than any lecture. They have to weigh up the decisions they make, set priorities and understand the consequences. Learning to manage a budget prepares young people for the real world.   



4. Help your children understand the value of money



A fixed allowance sends out the message that money is a gift, rather than an asset to be earned. Money is more valuable when it is earned, so "reward" them for some of the chores they do around the house, such as taking care of the garden. When they are a bit older, you can get them involved in family projects and share the profits with them. Of course, there are some chores that should be done without payment, because children and teenagers are expected to help out as part of the family. However, to get paid, give them additional age-appropriate chores.   



5. Avoid impulse buying  


If the child or teenager asks for something they have found and like, tell them that they can buy it with their savings. Encourage them to wait for at least a day before buying it. The item will still be in the shop and time will make the purchase decision more rational and less impulsive. Encourage reflection and ask the child to explain why they need the item in question.


It is important to teach children to wait and think before spending money. There are many temptations these days, and it is not easy to escape the trap of consumerism, even for adults. Being smart about money means using it on what we need.   



6. Open a bank account for your children  


When your children reach their teens, you can open a bank account for them. This is an important step in their financial lives as they’re building a nest egg to fulfil a dream when they grow up. You’ll also be teaching them the importance of managing their money efficiently, which helps to promote financial literacy. 


When the time comes, take the child along to be part of the process and make the moment as exciting as possible. These days there are now bank accounts specially designed for children to help parents and children manage their money. The sooner you open one, the better.   



7. Help your child understand the world of finance


Saving is a good habit, but learning how to capitalise on your savings is also essential. Even if you think that children are still too young to grasp complex investment concepts, their brains and cognitive elasticity allow them to absorb more information than we think. In addition, familiarising themselves with some topics early on will make it easier for them to understand the financial world later on. 


Introduce some more complex concepts, such as bank accounts, credit or insurance and explain their importance in the management of an adult's finances. Explain, for example, that people use home loans to buy a house and that they have to pay monthly instalments with interest. You could also discuss some financial products and how inflation affects savings.  


In conclusion, helping your children to manage their money will take some time and effort, but it is essential if they are to become informed, secure and independent adults. You can count on Banco Carregosa to help you make the right decisions and to protect your family's wealth.