Teaching your children how to manage money is one of the best ways to prepare them for adult life. And it’s never too early to start. Basic money management skills – understanding the value of money, how to count money, how to save money – should be instilled at an early age, so children are as equipped as possible to deal with money as they get older.
So, without further ado, we’ve put together a guide to teaching children aged 3-7, 7 to early teens and teenagers all about money.
Young children (ages 3-7)
Start setting out financial best practice
One of the best ways to instil good financial habits in your children is to make them aware of money from a young age. Talk to them occasionally about handling money, spending it wisely and about what to do should things go wrong.
Talk about money in everyday situations
You probably deal with cash in some form or another every single day. If you take your child with you to the supermarket, bank or cash machine, use these trips as ways to start a discussion about managing money, explaining what you’re doing as you pay for groceries, withdraw money or speak to your bank manager.
Buy your child their first piggy bank
Buying a piggy bank for your children, or making a money jar, is one of the best ways to get them learning more about money – as well as saving it. You can buy piggy banks very cheaply, or simply use an old jam jar.
Encourage them to save for a purpose – set them a savings goal or give them an amount you’d like them to aim for. To get them used to handling cash, encourage your child to empty their piggy bank and separate all the coins out into their denominations. Then ask them to count it all up, or ask them to assemble, say, 80p in coins or £2 in coins.
And start giving them some pocket money
There’s little point in an empty piggy bank! It is, of course, entirely up to you when or if you’ll give your children some pocket money. If you decide to do it early, consider giving your child a small amount each week (say £1), and gradually building it up as they get older.
To help your children reach their money goals, offer to match whatever they save. So if your child wants to save up for a badminton racket and they’ve saved £10 over the course of a month, put a tenner in yourself and let them buy that racket. It’ll help them meet their goal quicker but, more importantly, it’ll teach them how to save and reward them for doing so.
Older children (7 to early teens)
Explain the difference between a piggy bank and an actual bank
Piggy banks are great fun, but as your children get older they’ll need to know a bit more about proper banks and how they work.
A very simple explanation is that with piggy banks, you won’t earn any interest. Put it in a real bank, on the other hand, and you will earn interest, albeit relatively small. Explain it as the bank paying you for lending them your money. Give your children a simple example of how interest works – for example, if you have 10% interest you will receive 10p a year for every £1.
Pay your children for jobs around the house
To instil the importance of being paid for labour, get your children involved in household chores – and pay them a bit of money for doing so. It’ll give you some much-needed time off, but it’ll also get them used to working and being paid for it. Set up a price list for jobs around the house, like this:
- Emptying the dishwasher – 50p
- Washing the car – £1
- Hoovering – 50p
Talk to your children about budgeting
You probably have a weekly household budget for food, bills and other things. Ask your child to help you set the budget for the coming week – show them how much is coming in and how much is going out and get them involved in drawing up the budget. They’ll probably find it quite fun and it’ll teach them one of the key basics when it comes to money management: looking after your cash.
Look at online games and apps
At this age your child is probably better at using smartphones, tablets and laptops than you are. Find some useful money-saving apps and financial games and get them involved. Ones we’ve found include this money counting game from abcya.com and there are plenty at familylearning.org.uk.
Ask your child to help you shop
When doing the weekly shop, ask your child to help. Can they find you a cheaper alternative to the product you’re looking at? If, like some people, you use a calculator when shopping, give this task to them and have them keep track of your spending. Just ask them to let you know if you go over your budget, mind.
Older children (teens)
Open savings and current accounts
From a piggy bank to a proper account. Most banks offer bank accounts for children, and they’re pretty similar to the ones for adults. Your child’s first bank account is something of a milestone, and it gives them somewhere to formally put their pocket money and, when they start working, income.
If your child wants to, say, buy a car or start saving for university, then that first bank account is the perfect place to start. Generally speaking, most banks offer savings accounts for young children. Current accounts, however, tend to be available to children aged between 12 and 18, and some banks will only offer current accounts to children aged 16 and above.
Usually, bank accounts for young people don’t come with an overdraft facility, so there’s no danger they’ll go overdrawn and be hit with a charge.
Talk about university costs
As your children prepare for life beyond school, they might want to go into higher education. Now is a good time to prepare children for university costs. Explain to them clearly how much university fees are and how the loan system works. Going to university in the UK is expensive, so your child will need to know all about it.
Encourage your child to give to charity
Donating to charity is an important financial lesson, but it also teaches the value of social responsibility. As a family, pick a couple of charities you would like to give money to and set up a donation. This teaches your children the value of money and that, sometimes, it’s worth giving money to someone other than ourselves.
Talk about your money mistakes
We’ve all made mistakes when it comes to our finances. Perhaps you once ran up a hefty debt with a payday loan, went into your overdraft or borrowed credit when you couldn’t really afford to pay it back. Be open about some of your past money mistakes and explain to your children what happened and how you fixed it. This will prepare them for the inevitable financial slip-up they will no doubt experience at some point in their life.
Some fun activities you can try
Most children find playing games a whole heap of fun. Why not play some money-based games to teach them some basics? Here are some we like:
Set Up A Pretend Shop
Set up a pretend shop in your living room, with you playing the role of customer and your child the role of the shopkeeper. Using real notes and coins, not Monopoly money, get some cereal boxes, tubs of washing up liquid, fruit and whatever else you got lying around and, hey presto, you have your own store. By teaching your child how to exchange things for money, they’ll be getting to grips with the fundamentals of commerce.
Let’s Count Money
Get a heap of 1p coins plus one each of a 2p, 5p, 10p, 20p, 50p and £1 coin and place them on a flat surface. To explain the difference in value between all the coins, build a pile of 1p coins next to the ones that are higher in value. Knock the piles down and ask your child to have a go.
When drawing up your budget for the coming week, ask your children to get involved. Total up how much you’ll be spending and put it in your wallet or purse. When you come to pay for something, such as a bus ticket, ice-cream or weekly shop, hand the purse or wallet over to your child and ask them to pay, collecting the change and storing the receipt.
Handling money is something we all experience. Money is also always involved in important life events, like getting married, a first job, first car or going to university. It plays such an crucial role in our lives, so teaching your children about money from an early age is the best way to prepare them for it in later life.
Do you have any tips for teaching children about finances? Share them with us.
Generic advice is not a service regulated by the Financial Conduct Authority.