Educating children about banking is certainly one of the most hotly debated in many families – and not just because, as the Guardian has only recently once again confirmed, finding savings account offering decent rates has become all but impossible these days. Most importantly, dealing with finances is an important aspect of growing up for the young and can influence their behavior towards budgeting well into their adulthood. Which means that if you can get your message across, your children may be able to avoid the typical problems of losing touch with one’s finances, reckless spending and piling up debt.
Unfortunately, banking can be a difficult topic to approach when speaking to children as it may seem hard to engage them in the beginning. Tackling their perception of numbers within this context is where the challenge lies, though. Once you have their attention, the rest should come easily.
Offering Them Positive End Goals
Talk to your children about what they’d like to buy in the future should they have the money. If you give them a hypothetical scenario whereby they could purchase anything, this then lets them engage their imaginations and interact in a fun way. Maybe even get them to do a whole list of ideas. What this allows you to do is to help the child begin formulating a clear goal in their mind of what they want to achieve. With that you can then explain to them how banking responsibly will allow them to do that. This should then allow them to start recognizing the benefits of this particular practice.
Goal-oriented thinking also helps children formulate what it is they really want, rather than just blindly shouting ‘I want’ at everything they see. This will greatly help them in later life, as they learn to differentiate products which can truly make them more happy from ones which merely provide short-term excitement.
What Banking Involves
Teaching your children about banking should be serious. But that doesn’t mean it can’t be fun as well. Introduce your children to each element of banking in an entertaining and simplistic manner. Show them your own money management as you involve them in processes such as paying bills so they can see how it’s done. Ask them for their own input and get them to interact each step of the way as they take into account everything that’s happening as you organize the family finances. As a positive side effect this may also help you improve your budgeting and uncover potential weaknesses in your approach.
Showing them how a cash-machine works is also a good place to start, as they come to understand how we interact with money in our everyday lives. All this will enable them to see its real world applications and how we use them on daily basis. With some practical experience to ground them they can then go on to apply it more theoretically.
With their pocket-money, you can show them how it can be saved for a period of time to get what they want. Get them to start dividing it so that they understand the concept of saving for the future. When they have some to spend in the present and some to spend at a later date they can then begin formulating how to best plan their finances.
You should never underestimate your children’s savvy when it comes to electronic gadgets and software applications. Today, some three-year-olds are better at operating their digital camera than their parents, so you can and should make use of this proficiency to introduce them to the myriads of finance- and budgeting-apps which have become available of lately. Some of the better apps on the market are capable of organizing your finances in a way that will help you arrive at a far deeper understanding than any traditional bank statement ever could.
Getting Them Started
Opening an account in their name is a good idea as it enables them to understand the value of sensible budgeting. The best solution by far is to opt for a basic bank account online, a so called eccount. These accounts are offering the most fundamental banking facilities without allowing for overdrafts. In some cases, they also come with a free prepaid card, which is another excellent tool for learning how to budget smartly. With a basic bank account, your children will be able to gather experience without any risk of over-spending.
Through talking and listening, you can open a good channel for communication. In listening to your children’s ideas you can help them develop as they consider the serious implications of financial savings. With a coherent idea they can then go on to gain a far clearer concept of responsible banking.
Born in Liverpool and currently living in London, William Masters works as a journalist in the field of economics and personal finances. Masters specializes in topics such as prepaid card technology, the continuing development of the banking market as well the effects of online technologies on the entire finance industry.