What are the 3 essential money habits to start teaching your kids? (Habit 1)

Your kids’ future financial wellbeing will be determined by the money habits they form. So, let’s make sure they form good ones!

These next three blogs are possibly the most important i’ve written to date.

Evidence shows kids who form good money habits grow up more confident and have less money worries (improving happiness and reducing mental health issues).

Don’t kids learn about money at school?

It’s clear we can’t rely solely on schools to teach our kids about money.

There are two reasons for this:

  1. Not all schools teach kids about money; and,

  2. Whilst they can learn the basics in a classroom, to form habits they need continual parental support.

Here are the 3 essential money habits to start teaching your kids in 2020:

Habit 1: Get them to put away 10% to 20% of money they receive for the long-term

Habit 2: Get them to save up for something they want to buy

Habit 3: Get your kids to record how much money they have each month

There are other money habits but these three are my ‘essentials’. As soon as kids have mastered basic counting they can start forming these.

Now let’s go through the first habit.

Habit 1: Get them to put away 10% to 20% of money they receive for the long-term

Every time your kids receives money, whether it's pocket money or birthday money, get them to put at least 10% to 20% to one side to keep for the long term.

This money is not to be spent now but is there to help them form the habit of ‘saving money to make money’. Over time these amounts will soon add up. It is then your job as parents to help them grow this money.

Helping your kids form this savings mindset and getting them to grow their money will have a big impact on their life, regardless of how much they end up earning in their ultimate career. If they can get money making more money it helps ease a lot of financial strain which many adults face today.

This money will also act like an ‘emergency’ fund when they are older. Should something bad happen that requires a lump sum of money, they can use their savings and avoid needing to take out a high interest loan.

“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which a tree of wealth shall grow. The sooner you plant that seed the sooner the shall the tree grow. And the more faithfully you nourish and water that tree of consistent savings, the sooner you may bask in contentment and beneath its shade.”

Quote from “The Richest Man in Babylon” by George S Clason.

How to help kids form the #Invest habit:

Have a place for them to physically put money e.g. a money box

✔ Each time they receive money, get them to put 10% to 20% of it in their box

✔ Once that money gets to a decent size (say £20), help them put it into their long-term savings

✔ Record how much is there each month (covered more in Habit 3)

What ever you do, involve your kids.. if you just automatically take 10% to 20% of their pocket money away before giving it, it becomes your habit, not theirs.

Tip: Keep some small coins in the house so that you can help them split out 10% or 20% of the money they receive.

How to make this money grow?

Your job as a parent is to help them make this money grow.

Most parents will put this into a bank account, but you could be better off by investing. Although investing can seem scary, I encourage you to spend time considering and learning.

Based on historical average, investing is expected to double the money saved every 7 years*. This compares to around 30 years to double in a bank account.

You can actually invest very simply, i.e. select a fund and just put money in (like a savings account) and don’t do anything else after that. I have a series of blogs on this topic as I believe it’s the best way to help kids learn about saving money to make money. In less than an hour you can have the confidence to invest and by doing so, make a material difference to what happens to your kids financial future. (Blog: What is investing?)

My kids have a share of our investment account and we keep track of how much of this account is theirs. They get to see their savings grow as we show them their savings as Blue Trees and each time they save, their forest grows. For more information on how to do this visit www.bluetreesavings.com

Any questions (none are too stupid!) please contact info@bluetreesavings.com

Last word

Imagine if you had saved 10% of all the money you had received since you were a kid and imagine if that had doubled every 7 years. Small amounts will soon start to add up. Start investing today to make a big difference to your kid’s financial future.

ACTION: Next time your kids receive money, get them save at least 10% for the long-term.

ACTION: Once they have enough put aside, have somewhere to help them make that money grow. You can find out about Junior ISAs here and how to invest here.

I hope you found this blog useful - if so, don’t forget to share it with other parents so they can start helping their kids form three good money habits.

Now it’s time to find out about the second habit which can also materially improve their future financial wellbeing -> What are the 3 essential money habits to start teaching your kids in 2020? (Habit 2)

Useful links:

Blogs you should read:

Recommended books:

* This is based on the historical average return of the global stock market and is not a guarantee of future returns. The value of your investments may go up or down.