January is a time when many of us will be focusing on our finances.

Perhaps you are feeling the effects of an overspend at Christmas or trying to save up for summer holidays. Whether you are setting budgets, evaluating investments or planning a spending spree – good financial discipline is a valuable skill for all adults.

However, the foundations are laid at an early age. So we asked Chartered Financial Planner and local parent, Gavin Porritt, for his advice on how to make money something that you can talk to children about. You can find out more about Gavin at www.holbornfinancial.co.uk.

Start early

Money means different things to all of us, you might find it fascinating, alternatively you might prefer to watch paint dry than have a conversation about your personal finances. Whether you are a saver or spender, may be determined at a very early age. Research shows that children’s financial habits can be formed as early as seven years old, so it is never too young to talk about money with children.

While most advances in technology are a good thing, the switch to a cashless society is not necessarily positive for our bank accounts. Studies have shown that when we spend physical cash our brains register a small amount of pain as we part with it, this acts as a brake on our spending. When spending using cards, or indeed online, the brakes are off.

Real life shopping can be a great way to introduce them to the concepts of saving, budgets and value. Make a list before you go, discuss why different brands cost different amounts, check the arithmetic on multi-buys and discuss coupons if you are using those.

Introducing these concepts now will mean cost/benefit discussions that will be repeated in later years when considering more important insurances in adult life.

There isn’t necessarily a right or wrong answer to these questions, but having the conversation with children is important.

Little and often

Talking about money is key in children growing up with a healthy relationship with it. That is best done by making money part of everyday conversation.

If you are out for a meal, take a look at the prices on the menu. Discuss any special offers. Is it good value to take a two or three course set menu? What if you wouldn’t otherwise eat three courses or it doesn’t include your favourite meal?

Encourage saving

Deferred gratification is not an easy lesson for any of us but it is crucial. Dividing money received, either regular pocket money or one-off, into “Spend” and “Save” pots will start giving your child the discipline that will serve them well in later life. Counting it and spending it on something exciting periodically will reinforce those good habits.

You may want to set up a bank account. Some have perks associated with children’s accounts. Look out for things like a bonus for regular saving or interactive coin counters which make paying in cash fun.

Budgeting is a key life skill, very few people are in the position of being able to buy whatever they wish. Knowing how to distinguish between what we need to buy and what we want to buy is essential to our financial well-being. Letting your child take responsibility for their money, whether pocket money or money from completing chores will allow them to develop the right habits, rather than having to change at a later stage.

As children get older, you may be able to develop the conversation into longer term objectives. Teenagers may want to save up for a special trip or expensive pair of trainers. Why not try to help them by planning out what sources of income they have – perhaps an allowance or money they can earn from chores – and how long it will take them to save. Everyone’s budget will be different, however there are plenty of resources available to start putting something sensible together. While this may be their first budget – it will definitely not be the last!