4 Ways to Help Teach Children About Money

Helping children understand money is right up there with the most important things you can teach them. They need to know its value, where it comes from and just how fast it can go if you don’t keep an eye on your bank account regularly. But like with most things, just because it's important, doesn't mean it's easy. But hopefully these tips and advice will help you to teach your children a little bit more about money.

The younger they start, the less fear children have of money as they mature. A bonus is that kids also grow up feeling confident about working with numbers, from basic adding and subtracting to more complex financial aspects such as interest rates. It can pave the way to future success, and could even lead them to investigate a career in accounting, or simply guide them towards wiser spending decisions as adults. 

It’s Never too Soon to Start

In today’s cashless society, small children might not see you handling actual coins very often - something that was made very clear to me when I was trying to teach money during home learning last year. The disconnect between earning money and spending it starts even earlier than it did in previous generations that used cash more. So, while you might always pay for groceries with your debit card, it could be an idea to carry a small amount of cash and let young children buy something they want, hand over the cash themselves, then get their change.

This brings us to another common problem children often have with money: they don’t automatically understand that having more coins isn’t the same as having more money. Games with coins can help here. Have piles of coins in different denominations and show them how, for instance, one 5p coin is the same value as five 1p coins. Of course they cover this at school, but it's always great to follow this through at home too.

Make Spending Decisions Out Loud

We all know that children learn best through watching and repeating. So why not take this advise when it comes to money too? In supermarkets you could: 

• Reason verbally so your children can hear why you’re choosing one brand over another. 
• Compare the prices on a couple of similar items such as one branded and one generic. 
• After checking out, go through the receipt with them before you leave the shop. 
• Show them how, by choosing a just-as-good but cheaper alternative, they could then afford to buy something extra. 

You can also include children, especially older ones, in family decisions about days out or holidays. Discuss prices, how much and for how long you’ll need to save up, what the daily budget might be, the various costs of different types of travel and how your budget might influence your decisions. It doesn’t have to be a heavy or judgemental conversation, just make it open and inclusive. Children will soon accept money as a natural and important part of decision-making. 

Encourage Saving and Budgeting

Confidence with money comes from building up a history of successfully managing it, and this is something you should ideally set up at a very young age. You can start with a money box, move on to a children’s savings account with a bank, and maybe progress to a debit card when both you and the older child are confident enough. 

Instead of handing out a fixed amount of pocket money each week, give children the chance to increase their earnings by doing jobs round the house. Keep a tally score and jobs list available (maybe pinned to the fridge) so they can see what needs doing and claim tasks if they feel like it. With each job having a fixed ‘wage’, ticking off the job as it’s done increases their weekly allowance by that much. Remember to keep track of who does what, or have a separate tally for each child. 

One way of encouraging older children to take responsibility for their spending is to put them in charge of their regular purchases. It could be toiletries or makeup, hobbies, social activities, clothes, or anything else. Agree an area of spending with your child, then decide on the amount of allowance by figuring out what you’d spend over a year then dividing by 52 (or 12 if you want to pay monthly). Having a personal pot of money is a great way of encouraging ownership and responsibility. They'll soon learn that life isn't as much fun when all their money has run out!

Share your Household Budgeting

This might seem a bit radical, or even ‘oversharing’. Most parents wouldn’t dream of letting kids in on their credit card spends, savings, bill amounts or mortgage and interest payments. It’s a personal decision and wouldn’t work for everyone. But by doing it, however, it demonstrates that even adults must live according to their budget, and sometimes maybe go without one thing to pay for something else. While you don’t want to burden children with grown-up concerns, it can help them develop a mature attitude towards managing their own money. It can also banish any feelings of unfairness as they realise they’re not the only ones who can’t always have things the minute they want them. Very often, real world finance isn’t taught to any great depth in schools, so we end up learning by trial and error unless we choose to deliberately study for a career in accounting or finance.

Making money talk a regular part of family discussions and trying to include children in money decisions when it’s appropriate, is a fairly painless way of ensuring they grow up feeling comfortable and confident when making their own financial decisions. 

What other tips and advice would you add?

This is a collaborative post.