The Competition and Consumer Protection Commission (CCPC) has a number of steps to help you show your children how to make smart money decisions:

Step 1: Teach your children the difference between needs and wants
The relationship between needs and wants is an important concept to understand. This will make future conversations about money easier. Pocket money can be a good way to start. It doesn’t have to be much. For instance, how much will they get, and on what basis it is given, is it earned? It is important to be consistent. Then discuss with your child how they plan to spend their money.

Step 2: Teach your children to budget
A great way to help your child get started and learn how to budget is to have three jars with the following labels:

  • Spending: For buying something straight away
  • Savings: For setting a goal, for instance if they want to buy a toy, book or sports jersey. Explain to your child why it is important to save and show them how they can do this by agreeing on a savings goal together. Get them to work out what the cost of the item they are saving for is and how long it would take to save for it, based on how much pocket money they get.
  • Future: This is money that is put away and can’t be touched until an agreed time in the future. For example, it may be for a holiday fund. Teaching your child the importance of putting a little away for a special event or a rainy day is a good way for them to be prepared for what might happen in the future. 

Every time your child receives money they can decide how much they would like to put into each jar. Over time your child will begin to understand how to manage money. They will then be ready for the next step, opening their own bank account.

Step 3: Encourage your children to open a savings account
It is a good idea to help your child to open a children’s account. Banks, credit unions and post offices offer children’s accounts and they can open one with as little as €1. Children’s accounts are usually easy to use and have no charges. Once the account is opened, you can encourage your child to lodge money from their savings jars into their account each week.

Step 4: Reward your children’s money saving efforts
You may find your child losing interest in saving their money or becoming frustrated when they want to buy something straight away without having enough saved. You could encourage them to continue saving by agreeing to match the amount they have saved. Do this for a couple of weeks to help them reach their goal.

Step 5: Make sure to keep it fun
A good way to teach your child about making choices is to involve them in some household budgeting decisions. For example, when planning your next family day out give your child the opportunity to be involved in choosing where to go. Try to limit the choice to two or three different places. Give them the total amount you have available to spend and discuss the pros and cons of each. Discuss the cost involved and the importance of prioritising what is most important to them. When on the trip give each child a small amount of money to budget and spend on themselves. 

Fergal O'Leary is Director of Communications and Market Insights at the Competition and Consumer Protection Commission (CCPC). The CCPC is responsible for enforcing competition and consumer protection laws across the economy. To help consumers make informed decisions it also gives independent, unbiased information about consumer rights and personal finance products and service through its consumer helpline 1890 432 432 and consumer website.