It’s important to get kids interested in money and how it works from a young age, as any preparation you can give them will be very useful as they get older.
As we all (unless you’re the Queen) have to handle money and pay for things like rent, mortgages, bills etc. eventually, early exposure to cash and how banking works can set your children in good stead for the future, and help to prevent them getting in trouble or making poor decisions due to ignorance.
Here’s our Children’s Guide to Banks which should get kids started with the basics of money, banking and saving.
Part 1: The Basics of Money
Whenever anyone buys anything, they need enough money to pay for it. This is true for everything from buying a chocolate bar from the shop to buying something bigger like a house or a car. Things can be paid for with cash (coins and notes) or by bank card - where money is taken from a bank account and paid straight to the right place.
This is done by computers and it means the money doesn’t have to be taken out of the bank first. Many people do this because it’s easier and because it’s safer. Carrying a lot of cash around with you is not always a good idea, as it could be lost or stolen. This is why people keep their money in the bank.
Money is a fact of life, but it doesn’t just appear out of nowhere. Money has to be earned, which means people have to work for a wage. A wage is what you are paid by a person or a company that you work for when you become an adult. There are thousands of different jobs out there, which means there is something for everyone.
If you are good at climbing ladders and being brave, then you may like to be a fire fighter. If you like caring for others then looking after old or sick people could be a good job for you. You could be a shop keeper, a writer, an astronaut, an actor…all jobs will pay you something, but some pay more than others.
The wages people get for doing jobs is used to pay for housing, food and bills. Any left over money can be spent on things like going to the cinema or going out for a meal. Keeping money in a bank is one of the safest places you can put it.
Part 2: Banks and What They Do
Banks keep money safe. You can open a bank account for free and pay your money into it. Only the person who owns the bank account can take money out. This can be done with a bank card at a cash machine or over the counter at the bank. You can also use a bank card to pay for things in shops and online.
Banks can also help when you need more money than you have. They may lend you money to buy something big, like a house or a car, and you’ll be expected to pay the money back in small amounts over time. Interest will be added, which means you end up paying back a little more than you borrowed in the first place. This is a payment to the bank for their help. Sometimes the banks will be strict about lending money and may not always agree to do this.
There are many other money lenders who can help – you don’t always have to ask your bank.
Of course, you don’t have to borrow money from the bank if you don’t need or want to. If you make more money than you need, then you can put this into a different type of account called a savings account. This type of account is made for putting money away and leaving it there to grow. A bank will pay interest (a little bit of extra money) to you if you keep your savings in their bank for a long time.
This is how savings grow, meaning you end up with more money in the end. When you borrow money, you have to pay the interest. When you save, the interest is paid to you.
Part 3: Some Banking Words and What They Mean
Your bank account really only exists on a computer, but it means you get a special private part of the bank all to yourself. This is where you keep your money. You can have as many bank accounts as you like, although many people only use two – a current account for paying in wages and taking spending money out of, and a savings account to put away extra cash for the future.
When you borrow money, you’ll have to pay a little more back than you borrowed. This is how banks make money and is called interest. You can also earn interest on money you put away as savings. This is where the bank pays you some money for keeping your money with them.
A loan is money that your bank or other business lends to you. The amount of money you can borrow will probably start off small, but after showing that you can pay back money properly you may be allowed to borrow more in the future.
ATM stands for Automated Teller Machine. These are the machines you see in the side of walls at banks or on the street. You put in your bank card, type in your PIN (four numbers which make up your secret password) and you can get cash out of your bank account. You can do this even when the ATM is in a different bank.
A withdrawal is when you take money out of your account. A deposit is when money is put into your account.
A bank statement is a list of all the withdrawals and deposits that have happened to your bank account. Statements usually cover 1 month. It’s useful to check your statement to make sure money is going in and out of your account as it should.
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