As yet another school year rolls around, most parents will likely agree it’s a relief to see the kids – young and old – occupied from Monday to Friday.
Even more will agree that the cost of keeping a household running seems to reach fever pitch at this time of year – but how many of you think that school or college is equipping your kids with the financial education they need?
Below are just three of John Lowe’s top tips for parents who have felt the pinch – and want to educate their children about money matters.
1. Pocket money
Although not a luxury every family can afford, providing your children with their own "income" can be a valuable lesson in money management – provided you go about it in a smart way. I’m not talking about a €5 note to take to the shop on a Sunday afternoon; rather, using an allowance and an introduction to accounts to teach your child to take a structured approach to finance.
There are plenty of child-friendly bank accounts to choose from, often with better interest rates than those for adults: Bank of Ireland’s Young Savers Account for 0-12-year-olds, which offers 2.5% interest on the first €5000; the uFirst account from EBS, for 0-11-year-olds, with 0.95% AER; or simply the good, old-fashioned Cyril the Squirrel savings stamps account from the Post Office.
However, you can create just as positive an experience – and teach just as many lessons – by setting up a simple spreadsheet that records your child’s weekly pocket money and sets savings goals for things like expensive toys or holiday spending money.
Not only will it help your child to feel a sense of accomplishment and pride when they reach a savings goal, but you can also use it as a tool to counterbalance pester power: you’re not saying "No" to that new iPhone, but maybe you will cough up the other half of the cost once your child saves up their contribution.
Accounts like this are also the perfect place for birthday money, First Communion or Confirmation gifts, windfalls from generous grandparents, as well as anything of monetary value that your child can’t appreciate now, but could use at a later stage.
Trust me: a few euro a week might not seem like a lot, but managed in the right way, it can become a couple of grand by the time your little one is ready for their first car.
3. College students and curbing their spending
Of course, no matter the goal, the earlier you start saving, the better. But when they’re in college, it can seem nigh on impossible for your fledgeling adults to stop haemorrhaging money.
If your freshers are living at home, one of the best ways to deal with any tendency towards extravagance or irresponsibility is through tough love. Consider making a house rule that your third-level kids need to get part-time jobs and contribute to the household. Set a realistic fixed amount, inclusive of rent and bills, set up a direct debit from their account to yours and stick to it as much as possible.
This is really a win-win: either your child gets to live at home and save a fortune compared to what they would otherwise be spending in an exorbitantly inflated rental market, and your costs are somewhat offset; or, if you’re in a very fortunate position, you can hold this money in a separate account and return it to them once they graduate.
My advice? If choosing the latter option, don’t tell your children; that way, they won’t have already spent the money in their heads by the time they get it.
Start them young and mark my words: your children will be Money Doctors themselves one day!