YMFT Finance

Financial tips for a modern world.

It is really important that we help our children to have a good understanding about money. There are many advantages in life if we know how to handle our money well. Understanding about debt, budgeting and sensible spending will all come in time, but it is great to start with teaching children about saving money. As soon as they start being given money, perhaps pocket money for you, birthday and Christmas gifts or money from grandparents it is a great time to start talking about saving.

  • Money box – it is a great idea to get the children a money box really quickly. It can be a lot of fun popping the money through the slot and rattling it to see how much is in there and then taking it out to count it. They can put in money they are given and maybe money that they find on the street as well. Even small amounts can be fun, particularly for younger children who think that the more coins they have, the more money they have regardless of value. Obviously as they get older school will teach them about coins and their values and you can do the same thing.
  • Bank account – it can be wise to get them a bank account, particularly if they have a lot of money. The money will then start to earn interest which will make it worth more and it will be more secure. Children’s savings accounts tend to have good interest rates which are often higher than inflation. This is probably because banks want to encourage brand loyalty and if a child saves with them through their whole childhood, they may be more likely to bank with them as they get older. It is worth taking advantage of these rates but do compare and keep an eye on them as you may want to move the account if there is a bank with a much better interest rate.
  • Spend and save – some children and parents think that it is better if the children spend some money and save some. Some might do it on a 50/50 basis where they ask their children to put half of all money they get in their money box or bank account and they can spend the rest. Teaching children about spending can be as important about learning about saving. They need to understand how much things cost. They need to experience running out of money and realising they cannot buy everything they need, so they can start to appreciate the importance of budgeting. It can also be good if they waste money by buying an item they then wish they had not bought. Doing this at such a young age will help them to be more selective in what they buy as they get older and could prevent them from making much more expensive mistakes then. Obviously it would also help if parents guided their spending, allowing them to make a few mistakes and then reminding them of those mistakes they have made in order to try to help them to avoid them in the future.
  • Saving up – if children want to buy something that they cannot afford then teaching them about saving up is important. Learning that you cannot have everything when you want it is a good lesson to be learned and understanding that borrowing is not always a good option but waiting and saving can be. It can also be a good opportunity to discuss price comparisons and value for money and also to explain that it is okay to change their mind about what they are purchasing, because the during the time it takes them to save up they may change their minds. They should then make sure they abandon their original idea and move onto another or if they decide they want nothing then they have the benefit of lots of saved money that they can use when they do want to buy something.

Although this might sound like a lot of things, it does not take too long to implement each one. It can be fun talking about money with our children and although they get some finance education in school, it is important for parents to back this up. As they get older then you can start talking to them about your finances and how they differ form theirs. Discuss what sort of things you have to buy, how you budget and things like that so that they can learn from you. Hopefully they will learn from that and that will not encouraging them with their saving and budgeting but also help them when they have to run their own household. Hopefully just starting by teaching them about saving form a young age will allow then to grow up with an understanding of finance and its importance. It will allow you to have regular conversations with them about money and will hopefully allow them to get interested in money, how useful it can be and how to use it wisely to your advantage. Starting this at a young age when children will listen and take notice is well worth it as if you leave it until they are teenagers, you may find that they are less interested in listening to you and more interested in doing what their friends are doing which may not be the most sensible thing.

Going on holiday can be expensive. Even if you manage to pay for the holiday itself there are also additional costs. You may need new clothes and luggage before you go and then you may need to buy food and treats while you are there. You may be eating out, paying or entertainment, buying gifts and having days out which all cost money and therefore it is not surprising that many people will go overdrawn while they are on holiday. Although it can be fun doing all of those things while on holiday, returning to an overdraft that you have to repay is not so much fun. There are many steps that you can take to help to prevent an overdraft and some are considered below:

  • Save up money before you go – if you want to be able to spend the money while on holiday and on the holiday and not go into debt then you may need to think about saving up money both to pay for the holiday and the extras. This is easier if you plan well in advance It can be wise to see how much money you want and then set up a direct debit to put some money into a savings account each month to pay for it. If you want to go on holiday in a year’s time then you will split the cost by 12, if you are closer and only have six months then you will divide it by six. Clearly, the closer you are to the holiday, the more quickly you will need to save up and therefore the more money you will need each month. If it is getting really close then you may need to try extra things. It might be that you could sell some things that you own and do not need to raise some cash to pay for things. You might also be able to work some extra hours, get an advance on your salary and cut down what you are spending to try to raise the necessary money.
  • Take out an alternative loan – another option might be to take out a cheaper loan. An overdraft can be an expensive way to borrow money and so if you can find a cheaper method then this could be a better option for you, it will certainly save you money. Even if you have a bad credit rating. Do make sure though, that you are careful to look at all of the costs involved. Do not just compare on interest rates as there could be other charges as well. Also make sure that you note how repayments have to be made, how much they are and how often they need to be paid to make sure that you are able to cope with them. You also need to think about any effect that repaying a loan might have on you in the future. An overdraft will still have an impact but it will be repaid automatically when money goes into your account so you will not have the same responsibilities that you will have with a loan.
  • Reduce expensive activities – it may be good to also consider whether you can reduce the amount of money that you are spending on your holiday. Perhaps go to a cheaper location if you can but also consider making the activities you do less expensive. There may be cheaper options, such as self-catering rather than eating out, playing games at your accommodation rather than going out and things like that. It may be worth prioritising what you want to do so that you can make sure that everyone that is going does things they enjoy but you do not overspend by doing too many things.

It may feel a bit annoying that you have to go through all these thought processes and take these steps. You may just want to enjoy your holiday and forget about the cost. However, it is important that you make sure that you are aware of how things might be when you return. If you have to think about finances and repaying debts it might cause you stress or worry. This might mean that the relaxation that you got from the holiday soon disappears as you start to worry and this will not be good. It is much better if you can come back from your holiday without debt worries so that you can continue to feel relaxed for longer. However, if you do want to borrow and spend more than you can afford then put together a plan of how you will repay it. Perhaps by taking out a more affordable loan or by working out what you will do to repay it when you return. Having a plan to work by should help to reduce or even eliminate the stress as you will know that you have a solution that you will be capable of working through. This should help you to feel in control of the situation and therefore feel less concerned about the situation. Do make sure though, that you have a plan before you go on holiday so that you do not worry about it while you are away or just after you come back and negate the benefits of the holiday.