Children and money
Educating our children in personal finance will help them become independent and responsible: as adults, they will be able to take good decisions and control their budgets as informed and responsible consumers.
Day after day, children watch their parents interact with society: the value they attach to money, how often they buy things, the way they keep an eye on their accounts or budgets, etc. Parents are role models for their children.
The sooner children become aware of and familiar with the mechanisms and the rules, the better they internalise them and develop good habits. But no need to make them take a class: you can talk about what you are doing, and explain to them how and why you are doing it. Children could also be encouraged to participate, according to their age and level of interest.
(Source: Les Clés de la Banque)
You should be able to talk about money
Regardless of the state of your finances, money is a subject that must be addressed in family discussions.
If children ask questions, you should answer them. You can decide the level of detail of your answer.
At a very young age, children learn that we use money to buy what we want. Spending is limiting by the amount that we have. Children should learn that we cannot spend more than we have. If explained properly, this can reduce repeated requests for purchases.
(Source: Les Clés de la Banque)
Where does money come from?
The word ‘money’ comes from ‘moneta’, the Latin word for the places where Romans minted their coins. In today’s world, ‘money’ refers to currencies.
What is money for?
Money is a means of payment that allows us to meet our basic needs:
The price of a product or service is represented by the amount of money needed to buy it.
Money is what is accepted as a means of payment. Means of payment can take many forms: notes, coins, bank cards and bank transfers.
I buy things… that I want, or that I need?
You certainly know what you want, but you may not be able to tell the difference between what you want and what you need.
In life, as a child today and as an adult tomorrow, you will have to make choices based on your budget by learning to tell what is needed:
- Basic needs are essential for survival: needs and obligations
- Wants are things that are not necessary, but make life more pleasant: wishes and desires
Why is it important to save?
Saving money means putting money aside, whether in a piggy bank or in a bank account. Saving will allow you to pay for your day-to-day needs, buy yourself something that you like and pay for unexpected expenses.
You are getting or will get some pocket money and/or money as a gift, and you will need to learn to spend this money wisely.
What are banks for?
Banks serve many purposes:
- First and foremost, they manage money that belongs to their customers (like your parents, or you, if you have a savings account or current account)
- They make sure financial transactions are secure
- They lend money for major purchases, such as a house or car, or even to finance higher education
- They give advice to their customers – both individual and business customers – to tell them the best way to invest their money according to their needs for liquidity (cash), the risks they are prepared to take and the money that they need over the medium term
What is a bank account?
There are different types of bank accounts:
- The Current Account (for everyday use):
The current account is the account into which your salary, family allowance, or in your case, pocket money or wage from your student job is paid.
The current account is also the account from which you can make everyday payments, transfers and withdrawals.
- The Savings Account:
The savings account is used to put aside a sum of money for a longer period of time. The interest rate is higher than for a current account, and may vary depending on how long you will leave your money in this account.
Please note that you cannot use this type of account to make payments.
What is a bank card?
There are two main types of cards: credit cards and debit cards.
- Credit Card:
A credit card is a payment card, but with deferred payment. You can use it to make online purchases and in shops that accept these cards. You can also use it to withdraw money from certain ATMs. These cards are issued by large companies that often offer a range of additional services, such as insurance.
The main feature of a credit card is that any transactions carried out with it are not debited from the linked account until the end of the month, or the beginning of the following month, except in the case of ATM withdrawals, which are often debited from the account very quickly.
- Debit Card:
With this type of card, you can carry out transactions and these are debited from the linked account straight away: payments in shops that have the right equipment, cash withdrawals from ATMs, etc. The transaction is registered almost immediately. You can also use your debit card to perform operations using the bank’s self-service machines (self-banking).
Source: L’ABC du Consommateur – le domaine des finances, ULC
How old must I be to receive my first bank card?
Most banking institutions in Luxembourg allow young people to have a bank card from the age of 12.
So, from 12 up, you can have your own bank card, which you can use to:
- withdraw money,
- transfer money between your savings account and your current account,
- perform electronic transfers,
- check your account balance.
The terms and conditions may differ from one banking institution to another.