Kate Howells, wealth manager at BRI Wealth Management plc, discusses how to teach children about money and finances at a young age.
As wealth managers looking after high net worth clients know, the level of investable assets doesn't automatically track with financial literacy and awareness among some family members. For years, a popular refrain has been that more must be done to educate young adults, and children, about the basics of managing money as a foundation for later life. To that end, Kate Howells, wealth manager at BRI Wealth Management , shares tips on how to teach children about money matters, highlighting the importance of learning good habits at an early age. The editors of this news service are pleased to share these views; the usual disclaimers apply to the views of guest contributors. Email firstname.lastname@example.org
According to Howells, a University of Cambridge study found that children as young a seven can grasp the concept of the value of money and lessons can be learnt which will promote positive financial behaviour.
She outlines four ways for parents to improve their children’s financial literacy. These include:
One of the easiest ways to begin teaching children about money, is to encourage them to start saving, she said. In place of the traditional piggy bank method, research suggests that a clear jar is a better option as young children are particularly good visual learners.
Make it relatable
Another way is to relate money to everyday moments or things within the house, she added. Whilst on a grocery shop, it’s good to be vocal about the items in the trolley, so that children can build up an understanding of costs, she explained. Children are now a lot more tech-savvy. In this modern age, where physical cash is fast becoming a thing of the past, it’s important to explain to children the concept of credit/debit cards and the contactless payments process.
Keep it fun
When it comes to children, learning is always best when it’s fun! Games and fun activities can introduce learning about money and saving into children’s regular routines, she stressed. Citing an example, she highlighted Island Saver, a free game from NatWest aimed at six to 12-year-olds.
Set them up for the future
One of the best ways to give a child a financial helping hand is to set up a Junior Individual Savings Account (JISA), she added. These are long-term, tax-free savings accounts for children. The current 2022/23 allowance is £9,000 ($11,000). The child can access this money when they are 18, helping them to purchase for example their first car, fund university or help towards a house deposit.
Another option to consider is funding a pension for a child or grandchild. Few people are aware that children too are able to contribute to a pension, she said. The current pension rules enable a non-income earner (i.e. a child) to add £2,880 in to a pension each year. This sum is then given 20 per cent tax-relief by the government which means that a further £720 is added, taking the total amount added to the pension each year to £3,600, she explained.
The child will not be able to access their pension until age 57 (under current legislation), which provides an excellent way to educate your child about saving for their future, she concluded.