I don’t know about you, but I personally didn’t learn much about money until I started earning it myself. Sure, we had a small amount of weekly pocket money to spend or save, but other than knowing that I’d have to save up for six weeks if I wanted to buy a new My Little Pony, I was unclear about any other finance-related topics.
We all naturally start to learn more about money as we get our first Saturday jobs, move out of home or try to stretch our student loans to cover our costs. But by that point, it can be a bit overwhelming to have to learn everything all at once. If they already have an idea about paying utility bills, getting a mortgage and choosing family life insurance, they’ll have a head start in life.
So, that’s why it’s a good idea to get kids involved in conversations about money and ‘life admin’ at an early age. I’m not suggesting they need to know about inflation, GDP or what shorting means – rather, you can give them a gentle and gradual introduction to personal finance.
They can learn about making and managing money, what bills and taxes they’ll need to pay, how mortgages work and so on, without it being a sudden leap into adulthood. Here are some conversation starters to get your children and teens interested in finance:
What are you going to do with your money?
Saving or spending, it’s the age-old dilemma for children. The immediate satisfaction of a pocket-money treat on Saturday morning, or a bigger gain after saving for a few weeks?
You can help children to decide what they hope to do with their pocket money and support them in whatever they choose to do. They may wish to bump up their weekly income by doing some extra jobs around the house, which will introduce them to the concept of working for their money.
Plus, if they decide to save their money, there are a couple of options available to help them see the benefits of this. Firstly, they can use a clear vessel to save their money in – it can just be a big jar, it doesn’t need to be anything fancy. That way, they can visually see the money piling up each week, which may encourage them to try to boost their funds further.
Secondly, you could skip the piggy-bank-and-cash option and instead open a savings account for children. This will give them an introduction to earning interest in a bank account – something that I wish I had learnt when I was young, as it might have encouraged me to save more throughout my life.
There’s something amazing about getting money ‘for free’ when your account is earning interest -that little boost to their savings each month will be thoroughly encouraging to kids. Plus, when they are given cash for birthdays and Christmas, they’ll have somewhere to save it straight away.
How much will you be earning?
When teens get their first job, whether that’s a paper round in the mornings or a Saturday job, that’s the perfect time to introduce them to the concept of paying tax and national insurance. In the UK, youngsters can work part-time from the age of 14, outside of school hours, so they may start earning their own money and have their first pay slip.
Sure, just a few hours’ work won’t result in tax deductions, but looking at their payslip together is an ideal time to ask them how much they will be earning in the future. You can speak to them about minimum wage – which they’re entitled to from the age of 16 – and their personal earning limits, including permitted hours and tax-free allowance.
You can discuss tax and National Insurance (another element that starts at 16), so that they realise that the amount they are paid is not necessarily the amount they will take home. And it’s a good idea to start talking about pensions as soon as possible…
When do you want to retire?
Not only is this another deductible they’ll need to understand on their future payslips, but they should also be aware of how beneficial it is to them to have an employer pay into their pension and how the government tax relief adds to the pot.
I would be feeling much more comfortable about my future and retirement now if I had known the benefits of starting a pension as soon as I started working, so it’s an essential conversation to have. When starting to save for a pension as an adult, it feels like a game of catch-up rather than being an effortless contribution throughout your life.
I’ve found that it’s particularly important to discuss pensions if your teenager is planning to become self-employed, like I am. Because there’s no ‘opt out’ of a pension, like in an employed job, it becomes something you put off. Sometimes for years. I now have a personal pension designed for self-employed workers and I wish I had started it decades ago when I was in my teens or 20s.
I know that it’s difficult to get teens to imagine ever being old enough to retire, but it’ll happen eventually – and they’ll thank you for having that conversation with them when they actually get to retirement age and find themselves very well-off rather than struggling!
What bills are you going to pay?
I’m not saying that you should be getting your children to contribute to your bills – although that would certainly teach them how their future will look! What I mean is, you can simply have a conversation with them about the cost of utilities and services each month.
An easy way to do this is to show them each time you receive a bill – which will often be quarterly or yearly. You can ask children to calculate what the monthly cost of the bill will be, whether that’s the water rates, insurances or electricity bill.
Then, you can ask them to suggest ways that, as a family, you can reduce those costs to free up more spare money for fun together. They might become more interested in saving energy and water if they realise the cost of paying for it; good for the environment and good for your finances.
Plus, looking at your household bills will give them an idea of budgeting for their monthly expenses, with a clear understanding of how many outgoings they might have in the future, including council tax, rent, food and fuel. And they may then realise that the ‘extras’ they enjoy, such as music, film and TV streaming services, are a ‘treat’ – helping them to appreciate them more.
I hope these questions have given you inspiration for chatting to your own children and teens about money matters. I believe that any conversation about earning and saving will help to improve their financial future. Let me know in the comments below what other things you think we should talk to children about – it would be great to hear how you’ve tackled personal money management topics in your own family.
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