Managing money and making good financial choices is an essential life skill. However, it’s not something that comes naturally to many of us. For parents, helping our kids get into good money habits is one of the key stages in life and this starts early. Not only that but we also need to be able to make our own sensible choices to provide money for university, travel, a house deposit etc. Whether you’re a financial whiz, or you find the whole thing a bit of a struggle, here are some tips on what to save for, when, and how to help children make good decisions.
If your children are still young then you have time to start putting money aside for university – it’s really never too early to start. Research put together by the Wesleyan indicates that parents will be responsible for around two thirds of the cost of university for each child. That comes out at an estimated £30,000. If you start saving when a child is born then you can cover this with around £100 a month. Wait until secondary school starts and you’ll need to start putting aside around £230. If you start saving when your child reaches 16 you’ll need to put aside around £500 a month until the very last term!
The first credit card
One of the easiest ways to get children to handle financial decisions safely is to expose them to finance products when they’re old enough to have one. A credit card is best paid off every month and you can teach young people this whether or not you manage it yourself. Having a credit card will start a positive credit record for your child and give them the chance to learn financial responsibility. It’s often better to do this now while the stakes are low than when they are being offered credit with huge limits.
The first car
If you want to encourage your child to study for a driving test with a view to their own car at 17 then this too can be a good money lesson. Encourage them to get a Saturday job to save for a proportion of the car so they understand its value. If you’re planning the car as a gift then start putting money aside from their 14th or 15th birthday. Remember that insurers take a dim view of very old, dangerous second hand cars, as well as brand new too powerful cars. If you want to keep car insurance costs low then choose something relatively new and efficient. Car finance is a great option for many parents. Choose a personal contract purchase (PCP) and you have the option of either buying or returning the car for your kid when the contract ends.
They may seem a long way off when you’re gazing into the eyes of your newborn but weddings happen to a lot of us! Whether or not you subscribe to traditional ideas of who pays, most parents want to at least contribute to the nuptials of a child. According to experts the average wedding now costs £20,500. An eye-watering amount for any parent. However, put £50 – 100 aside now and you’ll have more than enough to be generous. And if your children don’t go down the marriage route? Well, you’ve got the start of a deposit for their first home or a holiday fund for you to enjoy in old age.
The house deposit
Around a third of first time buyers now rely on parents or friends for a deposit for a new home. Potential buyers now need a minimum of £7,500 for deposit – and that’s only if you’re buying a property valued at £150,000 or less with the aid of a scheme like the government’s Help to Buy. With Help to Buy, first time buyers need only a 5% deposit. However, there are upper limits on the value of the property you can purchase that might push this out of reach for anyone in a city like London. Helping a child purchase a first home is probably the biggest expense for any parent. That makes this perhaps the one future financial decision that all parents should be thinking about from Day 1. The average age of a first time buyer in the UK is now between 30 and 33. That’s three decades over which to put aside enough to make it count.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley