What can parents do to help their children be more responsible with money
If there has been one shard of light to emerge from the recession it is that our children seem to have learnt a very important lesson.
By Kate Saines
They might have discovered the hard way - parents being made redundant, holidays cancelled, luxuries cut back - but it is likely to set them up for life and change the attitudes of a generation.
According to all the evidence, teenagers have emerged from the recession with tons of financial awareness. They are switched on about saving, they support their parents in reducing their spending and they are wary of debt.
At the very least, the younger generation seem to be engaging, all of a sudden, with a subject which was once considered very dull indeed.
According to a poll carried out by NatWest recently, 67% of young people aged 12 to 19 said their money management skills had improved as a result of the slump.
Meanwhile, Halifax discovered that over a third of children keep their money in a bank or building society account. And a YouGov survey commissioned by HSBC found 80% of children would rather save up to buy something rather than get into debt.
But there is still a long way to go.
The people behind NatWest's financial education for schools programme, MoneySense, believe the challenge is now to ensure the good habits learned by children continued into adulthood.
The problem is there are currently very high expectations among the younger generation when it comes to their financial futures.
For example, over a third of young people who hoped to go onto higher education expected to owe up to £10,000 by the end of their course, say NatWest.
But the average debt accumulated by students is nearer to £20,000.
Indeed, 61% expected to be able to buy their own home by the age of 25. Yet at the moment only 14% of homeowners are under 25 years of age.
And salary-wise, young people expect to be earning over £51,000 by their 35th birthday, in stark contrast to the average salary of £28,933 earned by the 30 to 39 age group today.
While there are now a number of schemes being run in schools to promote better financial understanding among young people - NatWest's MoneySense and HSBC's What Money Means projects are among them - everyone seems to be in agreement that parents must reinforce these lessons.
And children themselves, according to a Halifax survey, say they want to receive their financial words of wisdom from their parents. Apparently 69% want their financial education from their parents at home compared to 18% who say they would prefer it from teachers.
But what if you, the parents, are clueless about money and have no idea how to get the financial message across to your kids?
Well, there is plenty you can do and it's not even that hard. You might even find you learn something yourself.
Do as I do
The first step is very obvious - and that is to set a good example yourself.
Peter Bull, head of HSBC in the community, says: "There is a danger of children picking up bad habits from adults."
Getting your own finances in order is important. But if you are already a shining example of financial organisation you will be in a good position to promote your techniques to your kids in a way that is relevant to them.
Halifax's survey found parents are already playing a key role in getting their children to save, for example. Apparently, 69% of kids use an account opened for them by their parents and 20% also use the same bank as mum or dad.
And it's never too early to start teaching you children lessons in good finance. Mr Bull says financial education at an early age can reinforce children's better instincts.
Budgeting
Sarah Neary, head of the NatWest MoneySense panel, recommends sitting down with your children and looking at their incomings and outgoings.
She suggests encouraging your child to create a budget by helping them calculate how much they spend each week and highlighting where they can make savings.
"It's amazing how small savings can add up and be used for something they really want, like holiday money or driving lessons," Ms Neary adds.
It is important, however, to ensure you emphasise that budgeting is not about stopping spending money - it's about spending money more effectively.
"Use it as a positive tool," says Ms Neary, "to help them control their money so they build their confidence in dealing with money. This will help them in the future, especially when the time comes for them to leave home."
Encouraging them to shop around before buying anything big will also help to drive home the budgeting message. Ms Neary suggests looking for what is included in the price of what they want to buy and if there are any special discounts.
Saving
The MoneySense team also suggest encouraging children to save for a special occasion, something which can be done by opening a bank account offering interest.
Ms Neary says: "Opening a youth savings account will keep their money safe and allow them to see how money grows. Some accounts even provide discounts on mobile phones credits and cinema tickets."
And Flavia Palacios Umana, senior manager at Halifax savings products, says this can also help them learn to budget from very early on.
"Children can get in the savings habit at an early age by putting a fixed amount of money away each month, no matter how small.
"This will not only encourage children to get into a structured savings habit, but will also help them learn the importance of budgeting."
Discourage borrowing
It is important to make sure you don't allow your children to get into the habit of borrowing from friends or from yourself.
Sarah Neary explains they must learn what they can afford and spend accordingly on things like mobile phones and going out with friends.
"It's always better to go 'pay as you go' - that way, they can keep track of what they can and can't afford."
If they are struggling to afford something they really want, why not suggest they earn the money? If they are old enough, for example, they could get a part-time job.
Ms Neary says that not only can a part-time or summer job help boost pocket money but it provides them with great work experience and skills which would transfer into adult life, such as understanding a pay slip and writing their CV.
If your child is not old enough to get a job, you could get them doing chores around the home for extra cash.
Ms Neary also suggests your children get involve with any business-related activities at school such as market days or enterprise week.
And - if you want to provide your kids with some additional 'homework' going online and taking advantage of the vast array of interactive money activities will also benefit them.
"This could include creating a personal budget, setting up a small business and exploring ways to make their pocket money go even further," says Ms Neary.
Case Study
Bradley Knowles is a 16-year-old from Retford who has two part-time jobs which fit around his studies. He saves half the money he earns, and hopes to eventually be able to use it pay for a car, holiday and his further education, but he also enjoys spending the other half of his hard-earned wages.
He said: "I have a paper round in my village that pays me £10 a week and I also work for an estate agent at the weekend for three hours at a rate of £3.57 an hour
"Aside from my part time jobs, my mum pays for my mobile phone contract and gives me an allowance of around £20.
"I use the good old fashioned phrase 'spend a penny, save a penny'. I like to use my money having fun and spending some, but I also save some for any big purchase I might need later, such as a car or a holiday.
"I would say it is very important to save money for the future. But I also think it is important to have fun spending money because if you think about it, we earn money to live and enjoy life.
"Being switched on to money from a young age is so important because you are so close to earning a living and money becoming a more important part of life.
"[However]when it comes to responsibility, teenagers are nowhere near their parents - they don't have the experience of earning money, paying the bills, saving and then spending what's left.
"At the moment we don't have any financial requirement, and our money is our own. The MoneySense lessons included the facts about where our money goes and why it goes there, but until we actually start seeing our wages decrease due to National Insurance etc, it's not going to hit home in my opinion."
Aside from the 'spend a penny, save a penny' adage, Bradley also urges other teenagers keen to get clued up on money to have a bank account and to set a limit of how much has to be in there at all times, for emergencies.
He also suggests planning ahead. By knowing what you are saving for and how much it will cost you can work out the amount you need to put aside and for how long. "Whatever's left," he says, "just go and have fun with."
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