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Top tips for talking to your children about money

At a time where their demand for increased pocket money may be higher than ever, why not focus a portion of your family's free time into teaching your children how to manage their money properly? Get your child appreciating cash by following a few simple steps in this quick guide from The Money Shop.

Understanding the value

Teaching kids to really understand money - not just what it is and how it works, but what it means, where it comes from, how to use it responsibly, and the consequences it can have - is something that should be encouraged from an early age.

Introducing the concept of cash to your little ones will help to develop their long-term understanding. Something as simple as taking your children with you to the shops and explaining what you are doing as you pay will help them start to grasp the connection between the things they want and the shiny coins and notes that come out of mum or dad's pocket.

Playing shop games at home can help too, particularly with understanding the value of coins. Letting them play the shopkeeper is a great way to help children understand that different things, and different coins, have different values. Kids will naturally assume that larger coins are worth more, so explaining why 20p is more than 10p is important.  

Where the real shops are concerned, talk about your choices with your kids while they're in a receptive mood. Saying things like "I don't have enough money, I'll have to get it next time," or "I can afford more of these because they're a lower price" will help get them thinking.

Deciding their allowance

Summer holiday freedom may mean that the demand for pocket money increases. When giving an allowance, you have a choice as to whether it is freely handed over or given as a reward for a completed task.

Although the pocket money budget may alter due to an increase in demand for activities with friends, it's important that they understand they may have to work to do what they want to do this summer. Doing chores around the house in exchange for pocket money is a great way to teach the link between doing work and getting paid - even if they grumble about it.

Banking and budgeting

In order to develop their understanding fully, it's important to show your child exactly how every aspect of money works. When you have the chance, take your kids to the bank with you, and explain why you are there. Talk to them while you're budgeting, and explain that you're working out how much money you have to spend - just like they do with their pocket money.

Keeping up the habits

In order to keep up the good habits when they go back to school, keep the conversation going. Encourage them to ask questions if they are unsure, but try and answer them both truthfully and carefully.  

It's important to practice what you preach and, when you're teaching children the importance of money, to remember that you shouldn't buy what you can't afford. It is no surprise to know, your kids will learn by watching you, so if you have any bad financial habits of your own then you run the risk of passing them on.

Starting to teach your children about finances is a perfect reason to give your own relationship with money a refresh and will help you both in years to come.