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Five ways to teach your kids about money

Managing your own finances is a vital skill for adults to be able to live independently. As a parent, how can you help your teenager learn to budget and manage their own finances?

Young people need budgeting skills

Young people are waiting longer to move out. According the latest census, more than a quarter of 20-29 year olds are living with their parents (26.7%). That's up from 20.1% in 2011.

The coronavirus pandemic has undoubtedly delayed some people's plans and rent increases and inflation have made moving out harder than ever.

Despite this situation, for most teens, the promise of independence is exciting - moving away from their parents gives them the freedom to make their own rules. But to do so, they need to understand how to cope financially and to balance their spending.

So, how can you help them get ready to manage their own money, budget and avoid over-paying?

Here are five practical tools to get started.

Get your children to guess how much bills are

Rather than simply telling them, ask your children to guess how much each of the household bills costs each month.

Praise them for any they get right (or close enough!) but it's also great to surprise them with just how much things cost. They're less likely to ignore bills when they need to set their own budget.

Set them the challenge of getting those bills down

Obviously, this has many advantages!

Being able to shop around for cheaper energy or internet providers is a great skill to have for keeping bills down. The sooner they learn to use comparison websites and find the best deals, the more they’ll save over their lifetime.

They'll also learn how to work out if welcome offers (contracts that are cheaper at first but increase before the end of the contract) are worth it and how to factor in any costs of switching.

If they can prove to you that a bill will come down because of their research, you could even give them the difference.

Ask them to do the weekly shop

Just like with bills, there's always savings to be made on the weekly grocery shop.

Set your children to challenge of beating your shop – give them your receipt the week before and see if they can buy the same items for less.

Get them to find where you can save on your insurance policies

Insurance policies are often overlooked when budgeting. But if you have a mortgage, you're likely to have life insurance, critical illness cover, building insurance, contents insurance – the list goes on!

Show your children your insurance policies and the renewal dates. Ask them to work out when they need to shop around to find a better deal and, again, research the best options to present back to you.

This is a particularly interesting way to teach your children about the cost of living because they may not be able to save money straightaway. They'll need to set a reminder for when each policy is coming to an end and when they need to switch.

Let them take charge of monthly reporting

Ask your children to create a monthly report or spreadsheet to keep track of all the bills. This could even include one-off costs, like a family member's birthday, or things that the family is saving up for, such as a Christmas or holiday fund. You could challenge them to introduce a budget rule or to create a financial plan.

You might find your children might have good ideas about how finances can be organised that you might not even have thought of. It's good to let them know how helpful this report will be for you, as well as the important lessons they'll learn.

The more your children know about how you manage the family's finances, the more they're learn. And having their own responsibilities is the best way to get them to engage in the lesson.

They’ll thank you in the long term – well, if they ever move out…