Parents and Pensions: Having ‘the talk’ with your children
For most children, having a discussion with their parents about savings is an abstract concept. Add pensions to the mix and there’s a good chance of losing their interest entirely. However, with people now expected to work well into their 70s, saving for retirement from an early age has never been more important.
Research from the Money Advice Service revealed that your money habits as an adult are set by the age of seven. Proof that adults shouldn’t underestimate the impact they can have on establishing a solid financial foundation for their children’s future at an early age.
The fact of the matter is, when your employees worry about the financial futures of their nearest and dearest, workplace happiness, morale and ultimately productivity can plummet. In light of this, here are some tips that you may wish to share with them to help kick start conversations with their children and protect financial futures:
Strip it right back to basics
According to research from the Money Advice Service, 57% of parents think that they are the biggest influence on the development of their children’s money skills, yet over half admit to finding it challenging to talk to them about saving and financial matters.
Yet it doesn’t have to be difficult. Simply talking about household finances in front of your children on a regular basis is a great way to normalise things and show them the thought process behind saving. In practice, this could be as simple as openly discussing something you are saving for as a family, such as an upcoming holiday, and how much you are putting aside each month to help fund it.
With older children, you can encourage them to put a small amount of their pocket money aside every month to save for something such as a smartphone or other gadget. Whilst this isn’t directly related to pensions, it will ingrain saving habits that will help your children further down the line when it comes to building up a pension pot.
Make it fun
Educating children about money matters and savings should be a gradual and, where possible, a fun process. Don’t overwhelm them with long and serious chats. When your children are young, look for engaging and interactive opportunities to grow their familiarity with money and savings. For example, by allowing them to deposit coins in a parking metre, giving them a piggy bank or playing money specific games such as Monopoly.
Take them to the bank and open them an account
A savings account is another tool that could be used to teach children how to become more financially responsible. Although many parents may already have a savings account set up for their children, not everyone involves their children in it. This is a missed opportunity, as managing the account with them will give your child an exciting opportunity to set certain financial goals, and watch their money grow. It’s also a great way of starting conversations about how long it may take to save a certain amount of money, and ultimately ensuring they already have a foundation of savings to build on.
Give them a glimpse into your own financial future
A good opportunity to start having more serious conversations about saving for retirement with your children could be when they start their first job, or receive a pay rise. At this point, you could explain how retirement investments work and the different options they have available to them, using your own retirement plan as an example. And if you are not entirely happy with your current pension pot, you can help your children learn from your ‘mistakes’.
If you’re uncomfortable hitting this head on, simply having a conversation with your partner about savings while your children are in the room can act as a good substitute.
Walk the talk
Children subconsciously pay more attention to what you do than what you say. So, actively show your children how sticking to a certain budget, avoiding debt and investing for the future will help achieve their financial goals.
Sometimes if your child asks you to buy them something, use the opportunity to talk about saving for the future. Explain to them that when you’re saving, this might mean that you have to put off, or even give up, things that you want in the moment. As our research shows that almost half of Brits would rather live in the now, than put money aside for retirement, this is a good lesson for them to learn early on.
When it comes to financial matters, as a parent, you can have a tremendous influence on your children and help them establish good saving habits from a young age. Anything that helps raise a family’s financial awareness, from simple games to conversations with children from an early age, will make a positive contribution to both adults and children alike. That’s a given.