BY JOHN ELLIS, FINANCIAL ADVISOR
First Holy Communions and Confirmations are upon us again marking not only a spiritual milestone but also an opportunity to encourage financial literacy in our children. The amount of money children receive is mind-blowing, into the thousands in many cases representing their biggest financial windfall to date and providing parents an ideal moment to teach responsible money management.
Financial expert Frank Conway of MoneyWhizz recommends that parents engage their children in discussions about setting up savings accounts which can “transform these gifts into a cornerstone of financial education”.
For example, discuss dividing their windfall between discretionary spending, savings, and an amount to one or more charities. This will guide children in their understanding of the proper use of money helping them establish personal goals, begin to secure their future stability, and support worthy causes.
The pillar banks and online providers are extremely interested in attracting young savers by offering attractive rates. Currently AIB provides a 3% interest rate on balances up to €1,000 for Junior Saver (ages 7-11) and Student Saver (12-17) accounts, far surpassing the 0.25% offered to adults!
EBS offer 2.5% on balances up to €5,000 while PTSB’s Safari Saver yields 1% on up to €20,000 for children aged 7-12. Digital platforms such as Bunq, with interest rates ranging from 1.76% to 2.51%, and Revolut allow children to save with their parent’s permission. Before you make a decision review rates using websites like www.raisin.ie and www.ccpc.ie.
Big occasions are not the only time to instil good money management. A recent Teachers’ Union of Ireland (TUI) Credit Union survey reveals that nearly half of parents provide pocket money, increasingly via digital platforms like Revolut, and it can be used as a regular opportunity to teach financial responsibility. Unfortunately, no matter your age Deposit Interest Retention Tax (DIRT) applies to all accounts, so I suppose you could look at it as a time to introduce children to tax!
Financial advisor Daragh Cassidy of Bonkers.ie advises a weekly allowance equivalent to a child’s age for example €9 for a nine-year-old linked to working around the house or garden. Psychotherapist Stella O’Malley suggests initiating pocket money at age seven or eight, starting at €1-€2 weekly.
Meanwhile, Parent Coach Eileen Keane, Director of jumpstartyourconfidence.com and author of The Parent, emphasises that allowances should be “earned” to underscore money’s value. Linking pocket money to additional work about the home reinforces the connection between effort and reward.
Frank Conway advocates setting savings goals such as €120 for a desired item to cultivate planning and patience.
As children grow up involving them in household budgeting discussions enhances “their financial acumen”. Parent Coach and Founder of Parent Support Aoife Lee notes that by age 10 children can “manage funds and grasp deferred gratification.”
As parents, we are encouraged to use the big gift days and the ordinary weekly pocket money as opportunities to teach lifelong financial insights thereby laying the groundwork for our children’s financial security.
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