Giving financial independence to a young child may at first seem like a maniacal idea, but according to the majority of Independent Financial Advisors the strategy usually pays off in the long-run. Allowing children to take control of their money not only has a positive, empowering effect on their mindset but also forces them to learn the consequences of poor money management first-hand.
While the media constantly reports on spiralling levels of student debt and irresponsible borrowing among the key 18-24 demographic, few news stories explore the underlying cause of this apparent recklessness. According to Lisanne Mealing, managing director of MDM Associates, parents who mollycoddle their children through their school years are ultimately setting them up for just such a future.Feel free to find more information at teaching students life skills.
“If you haven’t started working with them at an early enough age, they could be blinded,” Ms Mealing warned. Summing up the perspective of a young person living away from home and for the first time being left in charge of sizable sums of money, she said the majority of students are understandably tempted to spend.
Conversely, if parents give children access to their own funds from a young age then numerous opportunities arise for the gradual acquisition of new skills. Aside from becoming familiar with the obvious consequence of money running dry, children who receive a monthly statement in the post have a perfect chance to sit down with their parents and assess their financial health. Key skills such as budgeting can be imparted in a relevant and accessible manner, while financial terms such as interest rates will also begin to make more sense.
As a youngster builds up an appreciation of financial responsibility, additional features can be added to his or her online saving account. The addition of a debit card will make it easier for more responsible children to access their money freely whenever they need to, while for older kids optional overdraft facilities can further educate them about the benefits and potential pitfalls of responsible borrowing.
In order for any of this to work, of course, children will rely on regular deposits of pocket money into their accounts. The average British child receives just £5,469 in allowance between the ages of five and 18 – a trifling amount compared to the average £186,000 price tag attached to raising a child from birth to the age of 21. Learning to manage this money responsibly is therefore overwhelmingly in the child’s own best interests – and with the right blend of trust, education and personal experience the skills they learn should stay with them long after they’ve left the nest.