How to Teach Your Children Good Financial Habits

Wanting to look after your family is one of the most natural impulses in the world, and that’s one reason why you’ll want to make sure your finances are in order, so you can provide for them now and after you’re gone.

But another way to help your loved ones is to instil good financial habits into them early on in life, so they’re in a much stronger position to achieve their goals in the future.

As a Chartered Financial Planner myself here are my top 5 tips for teaching good financial habits?

1. Start Early

Your children will start gaining an awareness of what money is early on in life, perhaps because they’ve pestered you for a toy or gadget and you’ve told them you can’t afford it.

This is the perfect opportunity to start teaching them in more detail about the value of money, saving and how you manage your various expenses, from paying household bills to paying for luxuries and non-essentials.

2. Encourage Them to Save

You can get your children actively saving money from an early age, by giving them a piggy bank or opening a Junior ISA. One technique I use personally is to split their pocket money into two parts. The first part they have each month to spend on whatever they like, and the other amount is set aside to be saved for times when they may want to spend more than the average month, such as holidays. It is their decision on how much to put into savings and how much to save so they take ownership of this.

Related Article: How to Make the Most Out of a Junior ISA

3. Set a Good Example

If you want to instil good financial habits into your children, you’re in a position where you can give them a positive example to follow.

If they can see you actively setting a household budget, weighing up how to spend your money and thinking about the choices you make, it will hopefully become second nature to your children, and they’ll grow up emulating your actions.

4. Set a Financial Goal

You’ll have various financial goals in mind both short and long term, from making sure you can afford this years family holiday to planning for your retirement.

You can encourage your children to get used to doing it for themselves by suggesting they set goals for whatever they want to buy. It doesn’t have to be on a large scale. For instance, it could be a new toy, computer game, a holiday with friends, a night out, a new smartphone or a laptop. What ever the goal, it will get them used to the idea of making sure they’re able to pay for things before they buy.

5. Teach them Budgeting Skills

Whether its money given to the children by you or if they are starting to earn their own money, perhaps because they have their first Saturday job, take the time to sit down with them and teach them how to budget. Show them ways of tracking their income and outgoings, so they can see what spending must be prioritized and how much money they have left for discretionary purchases.

How do we work with our clients and their families when passing assets onto the next generation and building financial plans for our client’s children and grandchildren at Howard Wright?

As I have mentioned in the points above, my job as an adviser is to educate and explain, when I’m advising my clients and their children and grandchildren its all about explaining the advice given, why we have come to this decision and what it will mean for the loved ones and what responsibilities these entail.

For Example, i may be setting up a trust for the grandparents for the benefit of the grandchildren, I therefore must explain to all the parties involved what each of their responsibilities are and answer any questions they may have.