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Know the facts

Know the facts: Child Trust Fund

This is all about your child’s future. Every newborn child, born after 1st September 2002, receives a voucher worth £250 from the Government, when you as parents register for Child Benefit.

This voucher has to be used to open an account called a Child Trust Fund (CTF) account. This account belongs to the child and can’t be touched until they turn 18, so that they have some money behind them to start adult life. Through the years you and friends and family can put more into it. The Government makes a second contribution when your child is seven (and will perhaps contribute a third time in their teen years). It could be used for further or vocational education, to fund a gap year, to buy a car or even put a deposit on a house or flat or start their own business.

Your child/children will see the example you have set and start to realise the value of saving. Understanding financial planning is an important life skill to learn.

So, if your child has a CTF, use it wisely to save for his/her future. If your child is too old to qualify, you can still save for them in a special savings account.

Know the facts: Building Societies and Banks

Simple ways to explain about banking to your child/children.

What does having an account mean?

  • It keeps money safe (so it won’t get stolen or lost).
  • Lets you get your money out when you need it, from branches or cash machines.
  • It can pay your usual bills regularly.
  • It lets you pay for things over the phone, on the internet, or in person.
  • It lets you manage your money by keeping track of everything.
  • It can sometimes lend you money (but it has to be paid back).
  • It can give ‘interest’ on savings, therefore making your money grow.

You may get these services in return:

  • A chequebook (for you to write out cheques).
  • A cheque guarantee card (this gives you cash up to an agreed amount and is a safeguard for the cheque).
  • A cash card (allowing you to get cash 24 hours a day from a cash machine).
  • A direct debit facility (paying bills automatically).
  • A standing order facility (paying any regular bills).
  • Monthly statements (telling you all the transactions you’ve made on your account).
  • Overdraft facilities (if they allow you to borrow more money than you have in your account).
  • Telephone and online banking (so you don’t have to personally go into the building society or bank, but can carry out transactions by phone or computer).

Know the facts: Why Budget?

Managing money is an important life skill. A good way for your children to get started is to learn how to budget: planning for what comes in and what is needed to pay out. When your child has a basic understanding of money, you can make budget sheets (on paper or on a computer spread sheet) - and it’s easy to show your child how to do one.

  • Together collect all the building society, bank or credit card statements (if you can get at least two to three months that would be great).
    • Here, you can explain all the money that comes in (wages, gifts, interest etc.) and all the standing orders, direct debits and cheque payments that go out.
    (N.B. If you find it difficult to explain, have a look at the glossary on this section which will help you explain the terminology).
  • Then collect all your receipts (the last two to three months to compare, if possible).
  • Try to explain:
    • which are receipts for food, clothes, treats, unexpected bills etc.
    • that necessities are food, clothes, heat, light, shelter. The other items are extras, when there are sufficient funds.
  • Look at the budget sheet sample (on pupils’ section factsheet).
    • help your child/children make the budget plan out by listing all payments in during one month and then on the opposite column all payments out. (Explain that the three month’s total for each item can be added, then divide by three to get the average monthly cost).
  • If you have withdrawn cash, get these receipts together just to tally with the statements.
  • Be careful about double counting if you’ve withdrawn cash, (you have probably spent it on bits and bobs with no receipts so it needs to go as an expenditure) - but you might have bought things for which you have receipts. Don’t frighten yourself or your child/children by counting this twice and leaving you with a big overspend.
  • But equally don’t under estimate what you need to spend each month. Always guess larger not smaller, that way you will always have cash left over (and not be overspent).
  • Any payments you make quarterly, or annually you need to divide to get an average monthly amount.
  • It will help your child/children to understand that there is a ‘limit’ to what you, their parents, can pay for and that everyone has to play their part in keeping the family moneywise.

Help your kids to be money smart!

At home:

  • Make sure they recognise different coins, and can add in 2’s, 5’s, 10’s, and 20’s. Play counting games. Play ‘shops’.
  • Encourage your child to understand that money has to be earned and that money is then used to buy things.
  • Show them what bills you have, help them understand invoices and receipts for things.
  • If they get pocket money or birthday gifts of money, encourage them to save for something special (or even a ‘rainy day’) rather than spending all their money on first thing that takes their fancy.
  • Give your child opportunity to ‘earn’ money themselves. They could help with daily chores: washing up, making the bed, gardening or older children washing the car.
  • Make sure they keep a record of their money - what they earn or are given - and keep it safe in a money box, piggy bank or better still, open a savings account for them.
  • Show them the types of bills received regularly at home, talk through the type of payments made.
  • Help them to understand how to keep records and importance of checking statements (click here for fact sheets on statements for 7 -11 year olds) .

Out and about:

  • Take your child shopping at the supermarket as it is particularly educational. Look at how much each item costs, that well known brands can be dearer than the ‘own shop brands’. Point out bargains and look for discounts.
  • Have your child take a calculator along and add up each item as you go around.
  • When shopping, have your child hand over the actual money (if paying by cash) and check the change. If paying by credit card, explain what you’re doing.
  • Be aware of ‘tricks’ such as supermarkets putting tempting sweets at the till.
  • Get books and DVDs from the library rather than buying them.
  • Help them understand that money isn’t everything but it can make life easier so treat it carefully.
  • Always set a good example yourself by showing that you plan, budget, spend carefully and save.