Property Ownership Skills Start Early

Property Ownership Skills, with all of the talk recently about the increasing difficulty that First Home Owners face getting a foothold in the market a recent study by Cambridge University may have a solution.

Many parents don’t talk about the value of saving money with their children until they are in their teens. A Cambridge university study shows that children are open to learning about the intricacies of financial management much earlier and can develop good habits as young as seven.  The Cambridge study uncovers how the different phases of a child’s understanding can be encouraged so that property ownership follows naturally on as an almost inevitable next stage.

According to the study, there are several stages on the path to learning about money and spending – and learning to count is one of the first. By the age of five or six most children grasp the idea that money represents something and can be exchanged for goods at a shop. By the age of seven they can understand that if the money they have isn’t enough for a purchase they want, they cannot buy it. But it isn’t until children can understand the passage of time past a month (about age eight) that they can learn the value of delaying an immediate want to get something greater later. This delayed gratification is the key component of saving and then of investing.

Most parents don’t think of explaining their choices as they fill a shopping bag, but letting children participate in purchases and understand why you buy what you do is a great start to making them realise that you don’t spend all your money on a whim and that some expenses have to be planned at least week to week and others over a larger time frame.

At the same time, providing pocket money and a piggy bank so they can touch and count money allows them to try out some of these principles for themselves – not buying a bag of lollies today is not only good for your teeth but it means you can save for  a toy from which the pleasure will be more long-lasting .

It pays to set up a bank account for your child as early as you can, making it exciting to go and put money into the account where it will earn interest.

It also helps if parents don’t just buy children what they want whenever they want it. Get them to use pocket money or wait for birthday, Xmas or other special gift times. They learn that the world doesn’t grind to a halt if they go without and that the pleasure of many things is short-lived anyway. Understanding that some items need to be saved for is a key life skill and without it property ownership is likely to be out of reach.

When a child’s savings reach an appropriate level, they can choose an interest-bearing account with parental help and as they get older they are ready to learn about investing. When teenagers get a part-time job, show them how to budget, dividing their money into saving, (long term goals) and spending (short term goals) and perhaps even allowing a little for charity.

Let us know what you think, do kids these days know how to be effective savers?