It is easy to forget the value of money. We live in a society that is ever more cashless and spending is simply tapping a card or phone and the money is gone. We often don’t even think about it, right up until we can’t afford to buy something that we really need. I firmly believe that if we learn how to manage money better, we will find that we have more than we think.
The best part of this is that, if we take back control of our finances and regain that knowledge about its real value, we can teach our children to respect money and manage it better.
And when times are tight and costs are rising fast, getting a handle on our finances means not having to worry as much about bills coming through the door. This article explores the ways we can steady our finances and teach our children the value of money at the same time.
How to Manage Money Better – an Example
I mentioned that we often have more money than we think. If we only talked about our finances and kept an eye on our budget, we could discover all sorts of savings we could make without causing too much change to our lifestyle.
I went to an event a couple of weeks ago and the speaker mentioned that her client had spent £5000 in the last six months on KFC. Yep, you heard me. The client was astonished, as she hadn’t realised that it had stacked up to that much. But, if you don’t regularly check in on your finances, these things can escalate out of control.
Had she looked at her statements, she could have seen how much of her money was going to KFC and made some adjustments. She didn’t have to stop eating there completely, but maybe cutting down on her trips or making her own on occasion could make a big difference. She just had no idea that it cost her so much.
Imagine having up to £5,000 extra to spend every six months!
Teaching Children the Value of Money
How do we teach our children about the value of money if they do not see physical notes and coins? How do we teach our children how to save money if we are not saving ourselves? How are we setting up and preparing the next generation to manage their finances if we cannot face logging into our banking apps? These are the things we need to stop and think about.
Well first we should ensure that they have a healthy relationship with money and that comes down to three foundations: spend, save and invest. This is what real life is about and instilling this in children early on is key. This is how we do it.
Wants Vs. Needs
In order to work out how to manage money better, we need to teach our children the difference between WANTS and NEEDS. This helps them prioritise, and there is a simple way to do it.
You get them to write a list of things they say they need in their life and the things they want. If they set high expectations on the need side, such as a Ferrari car, you should discuss the finer points of how they could achieve this.
Work out how much that car costs, what sort of job they would need to buy that sort of car, what level of education they would have to achieve before they get the job to get that car, and how long that will take. Keep the questions coming until they realise it’s not a NEED, it’s a WANT.
This shows them that there is work involved in acquiring their wants. It shows that money doesn’t come for free.
One of the biggest challenges at the moment is utility bills. For children, it is not always obvious that every use of energy in the home has a financial cost. If you have a smart meter, you can show them exactly how much you spend when you turn a games console on, for example. But even if you don’t, discussing how much energy costs and ways to reduce that expenditure helps them equate money to real life situations. These are practical habits that you can encourage to save energy and resources.
- Get the children to turn off lights that are not in use
- Try buying LED lights to save energy and discuss the difference in energy use
- Stop running the water when brushing your teeth
- Use draught exclusions to keep cold air out and warm air in
Concentrate on essentials
Don’t overstretch yourself to appease children’s pestering. Buy only the essentials when money is tight and explain this to your children. Children are resilient. They will learn they just cannot have the latest trainers right now. They might moan about it at first, but eventually will get used to it.
As always, open and honest dialogue will help with their understanding. This will, in turn, give them the resources they need to know how to manage money better when they grow up.
Talk to your children about entrepreneurship. What skills do they have now that will prepare them for their journey into adulthood. Encourage your children to express their ideas, no matter how crazy they might sound. Get them to test things out so they can see for themselves if they work, if they might work with more research and planning, or if they really are not going to happen. The joy of bringing an idea to life is part of the fun, the result is less important at this stage. One day they will have an idea that seems impossible, but they will make it work!
It is essential to work as a family through a financial crisis as it affects the whole family. Support each other and remember that every situation is different and temporary. We all go through struggles and stressful times, but it’s how you deal with it that will get you through the other side.
Knowing how to manage money better is part of this, for the adults and for the children too.
My work is all about fostering that connection between parent and child, helping you communicate in a clear, open and mutually beneficial manner. For help with developing these skills, book a free discovery call to find out what I can do for you.