My 6-year old daughter is old enough to understand that we must pay for things. She is also brave enough to walk up to the till on her own, with an item in her hand, and politely say “on card, please”. She makes sure she gets the receipt as well (doesn’t check if she paid the right amount though) and hand it back to me once done. If you ask her why Dad and Mum go to work, she would promptly respond saying ‘to earn money’. All good so far.

What she fails to understand is that the money on that card is finite. She becomes a little annoyed when she gets a negative response on asking for my card. It was nice for her to learn how to pay using a card autonomously but it’s time for her to understand the value. This left me clueless on where to start and how to approach the concept whilst keeping it fun and interesting. I did what parents usually do these days – Googled it! I realised I am not the only parent who’s struggling with it.

Parents and carers play a key role in preparing children to manage their money well as adults. By age seven, research shows that a child’s attitude towards money is already well developed. This makes it important to start building good money habits as early as possible.

A few tricks I use:

1. Its not an unlimited resource
It has happened a few times now that a refusal to buy a toy has resulted in tears (breaks my heart). She demanded to go to the ATM and get money. It’s important to make them understand that money must first go into the ATM/Bank before we can get it out. Sounds simple, but explaining that to a 6-year-old is a challenge. Good starting point though.

2. Budget – Make the right choice
We play a game now. I give her some money when we go out shopping and tell her she can only spend the money that she has. She can buy anything she likes (within reason) and she has total control. She enjoys that and has started thinking logically. If the toy is worth more than the allotted sum, she will have to save until the next trip.

3. Track it
Write down expenses in a diary in a structured manner. We sit and talk about the toys she bought and if she still likes them. The answer is often “not anymore”. The following question I usually ask is – “If you were given same amount of money again, would you buy a similar toy?”. “No!” is the straightforward answer.

4. Wish List
Her wish list gets modified every day after a few YouTube videos. She knows exactly how many days there are until Christmas or her next birthday. Also, it helps when we go shopping now, instead of wandering around looking for something to buy she shoots straight to the aisle as per her wish list. Distractions are less effective now. She has obviously given some thought to what to buy and it seems logical in her head. It’s a little win for both parties, really. Less disappointment as she is in charge of her spending.

5. Dream big and save more to spend more!
This is where I give her ideas to spend more! Yes, you read that right. I want her to spend more and get bigger, better things. She usually replies, “But Dad, that’s going to cost me so much!” This is where I ask her to tidy her room to earn more. I also add in a bonus; she gets more if she manages to keep her room tidy and clean for a continuous period of a week.
It works … sometimes.

6. £5 today or £8 next Sunday?
I mean business now. She gets a choice; She can either spend £5 today or spend £8 next week. Well, sometimes you win; sometimes you lose. She understands that she can save this week’s allowance and get more next week. You know where this is going – Pensions, Stocks and Shares ISA etc.

7. Share
This is not an option. I take one third of her ice cream and other treats. Time to teach her about taxes. If she volunteers to share her ice cream, I charge less tax. Charity tax relief.

Is it too soon to ask for a Father’s Day present? Well, I can only hope for the best!

Josh Gupta, CFP™ Chartered MCSI
Chartered Wealth Manager/Planner
Posted in Fiducia News on 16.08.19
Josh Gupta, CFP™ Chartered MCSI
Chartered Wealth Manager/Planner
Posted in Fiducia News on 16.08.19

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