5 creative money lessons for kids

By UK CreditCards.com

Your kids may do well in their education, or always get picked first for the local football team. But do they know how to handle credit card debt? Or how to budget everyday household expenses? Or even how to simply pay the bills?

It is important that your kids can manage both money and debt before they begin their adult lives. Here are some ways to teach them these important lessons.

kids-financial-experiences 1. Do the weekly food shop together.

Shopping for groceries is something that most families do on a regular basis -- perhaps once a week. If you take your children to the shops with you, interact with them and get them engaged in the process.

Provide your children with a set amount of money and let them buy the groceries for an evening meal. Get them thinking about how they'll use the money they have available to buy all the necessary ingredients. The key is making the challenge interesting rather than simply focusing on the figures.

2. Create the family budget together.

Do your children know where the household money comes from -- and where it goes? Most kids know that their parents have bills but don't have a clue about how much is spent on certain things.

Explain to your children how much money you receive and how much of that is needed for everyday expenses. It is important that you differentiate between necessary expenses and items that you may simply want. You will also need to explain that you cannot always buy what you want if you do not have enough money.

Sit down once a month with your children and draw up a large wall planner-style budget for display. You can make it child friendly by using stickers or drawings to symbolise money and bills. For example, the pet insurance could be stickers of animals, money coming in could be pennies, and so on.

3. Pay the household bills.

Paying the monthly bills is something that children will not have to deal with until they leave the family home and start their own. But you can make sure they become familiar with bills while they're still living with you, during their teenage years.

Show your children the bill, and let them figure out how much has to be paid and by when -- it's also a good idea to tell them what might happen if you miss the payment date. Explain how to pay the bill -- by using online banking or writing a cheque, for example -- and let your children carry out the process themselves.

4. Provide your children with pocket money.

It does not matter how much pocket money you decide to give your children. It could be £1 a week or £10 a week. The idea is to help them plan what to do with it.

If you use pocket money as a money lesson for your kids, don't fall into bad habits. If your children spend their money within a few minutes by heading to the shop for sweets, do not use your own money to buy them something else that they want. This will only teach your kids that, when you don't have enough of your own money, you can find it elsewhere.

Instead, teach your children to manage their money. Ask them to write down or draw a picture of items that they want. If what they want is a more expensive item, such as a computer game, explain that they will need to save a portion of their pocket money each week to afford it. The lesson they'll learn is that they can't spend all of their money in one go and must instead save up for what they want.

5. Save for the future.

After completing the above lessons, consider asking your children what they want to do when they are older. For example, if they want to be able to drive, ask them how they plan to save up for a car. Ask them if they would like to dedicate a portion of their pocket money -- 10 percent is a good figure -- to saving for this long-term goal.

This will help kids understand that they need to start saving early to achieve long-term targets and that with, some planning, they can purchase expensive items without going into debt.

 See related: How to teach your teen to budget with plastic, 4 ways to teach children about credit

Published: 30 December 2011