Guest Post: Plan for your child’s financial future

This is a guest post by Alexandra Maxwell.

There are some important lessons in life that parents want to teach their kids, such as why being kind to other people matters and why everyone needs to take responsibility for their actions.  Alongside these ethical principles, those who care for children must also teach young people some practical skills, and advice and information on handling money can never be introduced too early.

Money matters

A lot like learning about relationships and understanding the workplace, finding out about money really matters.  Kids who don’t learn how to plan and save miss out on the sort of experience that could help shape their future. Opening a simple savings account, and encouraging a child to put aside a small amount from their weekly allowance, emphasizes the principle of making provision for later life and introduces the experience of delayed gratification. Teaching young people to handle money well is a most important life lesson.

Counting out the future

Let’s start with very young children, say aged three to five years old.  At this stage of their development kids love to play at being shopkeeper and they often enjoy making adults or other kids pay for what they’re selling – which could be anything from a battered toy to a cooking pan. Joining in with their game gives adults the opportunity to explain how they’ve had to save up for that battered toy, little by little. This is a route that can help youngsters to understand what the piggy bank is really for.

Older children, maybe aged six through ten, are ideally placed to learn about time constraints, which just means appreciating how to wait for things they really want until there is enough money available for the prized purchase. So, adults might say: “with this much money you could buy this right now, or, if you waited just a little bit longer you could buy what you really want then.”

For kids aged 11 and upwards, a more sophisticated approach helps and dividing money between different purposes introduces the idea that some funds can do this – buy a new iPod, for example; some can do that – make a charitable donation; and the rest can do something entirely different, such as contribute towards college funds.

Best value savings accounts

When older kids, aged 15 plus, get to the stage where they begin to understand what a budget is and how to prepare one and stick to it, then it’s time for them to begin to manage their income and expenditure, and to maximize the value of their savings.

The type of savings accounts parents choose for their kids might very well change as the children themselves grow and mature; what works for babies and toddlers might not do it for teenagers – college funds have very specific parameters and this might mean that variables such as whether or not a checking account is included play a big part. Usually, online accounts are most attractive to teenagers. Ease of access is increasingly important, and this is where online accounts begin to score. It’s worth taking the time to read more about online savings bank accounts, and other options.