What is a loan, reserve or savings? What does a family have to manage to pay for? Where does money come from and where does it go within the family budget? We've put together a simple guide on how to start talking to your children about money. Build a foundation of financial literacy that they will build on in later years and make good financial decisions.

At best average, at worst the tail end of Europe. This is how the Czechs have been ranking in financial literacy surveys in recent years. In this respect, we have a lot of catching up to do, and even though practices in schools are improving, it is definitely worth educating children about money matters and not leaving it to the state alone. After all, that is different from listed words or multiplication tables. Money should not be a taboo subject in families and you can talk about it with children from a very early age. Let them understand that money doesn't grow on trees, but someone has to earn it, and that every thing costs something.

Be the first to broach the subject of finance with your children, so that they are not left with misleading examples from peers or the internet. Start gently and help them to understand the value of money gradually, so that they can save up for that toy or bicycle they want and not squander their first allowance or earnings from part-time jobs on rubbish. Don't fall for the various internet geeks who use YouTube or TikTok to scam money out of children, often beyond the bounds of taste, ethics and the law. Or take out the first loan they'll ever get as an adult...

To start you off, we've transported a simple "How it goes with money" style image. Of course, each family's situation will be individual, but with the help of the picture you can go through some basic situations and explain them to the children. Many of the concepts are broken down in the text below.

Do you need help with something about finances? Have you realised that your family budget would also benefit from having a professional look at it? Maybe just for peace of mind that you've got everything in order. Do you want to save or provide for your retirement? Will you need a mortgage or renovation funding in the future? Have you insured your property for a sufficient amount?

We can advise you on all of these areas and many more to make sure your finances are in order too. After all, it is by your own good example that you will best show your children how to approach finances.

Earnings
To have money, one must first earn it. Earnings are the money we receive as a reward for our work - in a job, in a business or when we sell something. We get money in cash, as notes and coins, or it is sent to our bank account. We then manage this money - we buy things with it, pay our expenses, save it or use it to buy something for pleasure.

Necessary expenses
These are all the things we have to pay for regularly, usually every month, because we couldn't do without them. For example, food and drink, electricity, heating and water, living expenses, paying the phone bill, fuel for the car and so on. We always need to have enough money to pay for these necessities first, so that we can spend the money on something else that we might not need as much.

Other expenses
When we have money left over after we have paid for all the necessities, we can buy other things or experiences that we want or enjoy but don't necessarily need. These might be new toys, sports equipment, new clothes, eating out at a restaurant, going to the cinema or zoo, or going on holiday with this money.

Family budget
A family budget works a bit like a list, where we write down how much money we earn each month and how much money we spend on things we need or want. This lets us know what we can afford and when we need to save. In fact, a healthy family budget is one where more money is left over than is spent. This is very important because it allows us to put some of our money aside for later.

Money for the future
It is not wise to spend all the money we have right away. It is better to save some for later when we need it for something. For example, we put such money in a bank where it is kept safe. We can save it in this way for just six months, or we can save it for a long time with the idea that we will use it when we are no longer working and are retired. The great thing is that this money doesn't just roll around, it works for us and builds up over time.

Savings
Saving is like putting money in a piggy bank. It's a way of keeping our money safely in a bank, for example, and slowly increasing it so that we can use it to buy what we need one day. This way we can save for a car or a holiday, for example. It's a bit like making our own treasure, and it has one big advantage - the bank or savings bank will add some more money to our treasure every month. So when you save, you get more money than you originally saved.

Investments
Investing is another way our savings can grow. You can think of it as putting our money to work so that it will earn us more money over time. It's like planting a seed and it grows into a tree that bears fruit. Investing is helped by various special companies that you entrust your money to and they use it to buy things (called stocks or bonds, for example) that will one day be worth more. However, unlike saving, this is not guaranteed to always work, so you need to be careful when investing and ideally take advice.

Reserve
We've already covered what we have to pay for and what we can buy if we have money left over. But there are also situations that come out of the blue. For example, if the washing machine breaks, it can't be fixed and we have to get a new one. Or when you lose your job and you don't make money for a while. That's why it's good to have a reserve - it's money that we keep in the bank, for example, that we can count on being able to use at any time to pay for any necessary expenses.

Insurance
We take out insurance in case something bad happens to us - for example, if we get sick or injured. Or if something damages our home or car. At such times, insurance acts as a protection so that we don't have to pay for such damage out of our own money. If, for example, a tree fell on our car in the wind or we were robbed by thieves, our insurance can pay for repairs and things we lost. For example, if we were unable to go to work because of a long illness, the insurance company would pay the money we would miss for expenses we normally have to pay.

Loan
It may happen that a person needs to buy something but does not have enough money together to do so. In such a case, we may borrow money from a bank to do so. However, it is important to remember that every loan has to be repaid and we always pay back a little more than we borrowed. Therefore, we should only borrow for things that we really need and that will last for a long time. Like a car. It certainly doesn't make sense to take out a loan for gifts or holidays, which will only make you happy for a while. We also need to choose who we borrow from well so that it is a fair loan. There are some companies that want to pay a lot more than the normal "payment" for a loan. A special loan for a long period of time with which we can buy our own home is called a mortgage.