Speak to your children about money

10 tips for parents

We all know it. We should speak to our children about money already at pre-school age; the sooner we start, the better. There is no manual taking you step by step through the process of introducing your child to money. Yet, as a parent, you had better not skip the period in your child’s life when you can play the "shopping game" with them. And no method is as effective as learning financial literacy through play. You can buy and sell painted pictures, pieces of fruit, chestnuts in autumn and daisies in summer. The child learns a lot through play.

1. Piggy bank

   Be sure to get one for your child. If the child chooses the piggy bank themselves in the shop, they will show more responsibility in handling it. Pay special attention to the piggy bank opening. Older children will appreciate the traditional ceramic piggy bank, which can only be opened with a hammer. By contrast, younger children may need to peek into the piggy bank every now and then to recalculate the money. So choose a piggy bank with a key. And, first and foremost! Have the initial capital ready. Your child absolutely needs to experience the beautiful clink of the coin against the bottom of the bank. So why wait any longer?

2. Wallet

   The choice of the wallet is important. Again, it is a good idea for the child to choose the wallet themselves. A lot of consideration should go into choosing a practical wallet that the child likes. Make sure that the bank notes can be conveniently inserted into the wallet and that the child's first wallet has a zip pocket. It may be a Velcro pocket, but those tend to form holes at the seams and the money can easily fall through them and get lost before your child gets the chance to spend it. You should definitely take your time choosing the proper model.

3. There must be a point in saving money!

   In order for the saving efforts to make sense, make sure to discuss with your child "what the savings will eventually go into". Depending on the child's age, it can be a trip to a cake shop with a double portion of ice cream, a toy, cinema tickets or a contribution towards a new helmet, bicycle or skis.

4. How does a preschool child lay their hands on money?

   Small children will have a hard time coming to grips with handling regular pocket money. Still, it makes sense for them to have their own piggy bank. Factor in that rather than the value, your preschool child is likely to be preoccupied with the quantity of metal coins in the piggy bank. Even the mere counting of coins, regardless of their value, helps. You can agree with your child that every last day of the month they will get a key to unlock the piggy bank. Your child will then be able to pay with their own money at a shop. They may also pleasantly surprise you by refusing to spend the money and choosing to let the savings grow for now. Any ideas on how small children can lay their hands on money? For instance, your child may use your money to pay for minor items at a shop or confectionery and keep the change. The ten or five crown coin your child retrieves from the shopping cart they have just returned to the stall can go straight to their piggy bank. Do you ever “accidentally” drop change from your wallet? Collect it and let the child keep the last three coins. With younger children, it is a good idea to stick to the vernacular they are familiar with. Your child is far more likely to understand you if you say: "The money in your your piggy bank will get you a theatre ticket." This is surely better than telling them: "See, you have already saved CZK 102 in your piggy bank."

5. Pocket money - yes or no?

   Pocket money YES. School entry is just the perfect time to start with this. How much pocket money your child gets will always depend on your budget and on what you agree on with your child. But once you agree on a pocket money arrangement, stick to the pay dates and amount. Lead by example. Don't make your child remind you that it’s pay day. And don't forget: Pocket money is for buying things that are fun. The child must know what expenses it is up to you to cover (school meals, fares, school clubs, etc.) and what they are supposed to pay for with their own money. Ideally, you will write everything down together. You can agree on changes every now and then, but stick to the motto "Good accounting makes good friends!" Also, there is a huge difference between I NEED and I WANT!

6. If you provide pocket money, then…

   Never ever use pocket money as an educational tool. If you want to teach your child to manage their money responsibly, this is not the proper place to present your concept of ideal behaviour. If you have any differences with your child, find a solution that will not affect the pocket money.

7. Save together

   Believe us, your children will really enjoy this game you can play together. Try to come up with a common thing the whole family will be looking forward to. For example, a visit to a water park, a family board game or buying a pet.

8. Multiple children within the family

   If your child already goes to school and you have agreed that you will provide them with pocket money, do not automatically extend the arrangement to the younger child as well. Explain to them that they too will eventually grow to the age when they will eligible for pocket money. Misunderstanding and resentment only occur if you fail to sufficiently explain the situation to the younger child. Just because they don't get pocket money doesn't mean they can't have their own piggy bank.

9. Payment cards

   Children attending upper primary school already have a relatively firm grasp of what expenses and savings are, what it means to lend or donate, and they roughly know how much things cost. As soon as you feel your children can also come to grips with how the "invisible money" is moved around, do not hesitate to set them up with a personal child account or get them a pocket money card. If you have an honest discussion about money with your children, they will be able to understand what the imaginary currency is all about.

10. Space for the children's business negotiations

    Borrow a reasonable amount of money from your child. After all, just about anyone may find themselves in a situation where they cannot pay for their coffee with  a card at a mountain chalet. Explain to your child that the repayment will involve a certain interest rate. And the negotiation game may begin. If your child sets a high interest rate, you had better borrow from your spouse or friend. Sometimes if you run after two hares, you will catch none. This is also how the child learns. If your child needs to borrow money from you, do not discourage them. In any case, you will need to agree on the repayment date and possibly the interest rate. With smaller children, the interest doesn’t necessarily have to be monetary. If your child agrees, you can suggest another sort of benefit. There are plenty of small jobs the child can do for the family.

And finally. You may have read all this information hundreds of times. You may have tried everything to no avail. Or you may not have tried any of these and everything still works properly. Either way, we can all agree on one thing: Making money is not an easy task, and managing it responsibly is even harder. Let’s teach it to our children.

We would like to thank Štěpánka Štrougalová of Juklík (www.juklik.cz) for granting her consent to us using her copyrighted text, and acknowledge the valuable life experience she has shared with us.

ČSOB wishes your child smooth first steps in the world of finance.