How to teach children about money

All parents want to prepare their children properly for the demands of the adult world. Helping children with basic skills like reading, writing and basic numeracy are common goals. But teaching children about money should not be overlooked, either.

Giving your child the knowledge they need to manage their finances can help them to achieve greater financial independence later in life. It can also make for better money management skills and a well-rounded understanding of finances. 

With studies such as BYU’s recent analysis and initiatives such as Steven Bartlett’s “Money School” showing the considerable benefits of teaching your child about money, it's never too early to start. 

In this article, we will discuss the importance of teaching children about money from a young age. We’ll also look at the numerous positive effects it can have for them later in life, as well as provide a list of age-appropriate ways to teach your kids about money.

Benefits of Teaching Children about Money

There are a number of positive effects of providing financial education to children from a young age. These benefits become clearer as children get older when it becomes easier to handle finances and manage money effectively.

Greater financial independence

When children learn about money from a young age, they are more likely to become financially independent in adulthood. 

Financial independence may lead to a number of positive effects, including increased control over the direction of your life, more flexibility to pursue your goals and greater peace of mind at every age.

Better money management skills

Children who learn about budgeting, saving, and investing are more likely to make informed financial decisions in adulthood. 

For example, a recent study showed that US high school students who were required to take personal finance courses had better credit scores and lower debt delinquency rates as young adults.

Ability to save

Children who learn about handling money from a young age are more likely to develop good saving and budgeting habits as adults. But learning to save isn’t just important for managing a household’s finances. 

Saving teaches both delayed gratification and self-discipline. It’s also an important skill for goal-setting and planning.

How to teach your children about money

Wondering how to teach your children about money? Here are some money management training ideas, tailored to different stages of their development:

• Age 3-5: At this age, children can start to learn about the value of money. They also discover how it is used. You can start by giving them small amounts of pocket money and letting them use it to buy treats or toys. You can also play games with them that involve counting money, such as setting up a pretend shop or playing with a toy cash register.

• Age 6-8: Children at this age are ready to start learning about saving and budgeting. Try helping them to set savings goals, such as putting money aside for a new toy or a special trip. Encourage them to save money regularly towards these goals. You can also involve them in family budgeting discussions and show them how to make a budget for their own pocket money.

• Age 9-12: Most pre-teen children are ready to start investigating more complex financial concepts, such as interest and investment. This means you can teach them about the importance of earning interest on their savings, or help them to set up a savings account or a junior ISA. You can also introduce them to the concept of investment and explain how stocks and shares work.

• Age 13-15: At this age, children can start to learn about financial independence and responsibility. You can encourage your kids to get a part-time job or start a small business to earn their own money. You can also help them to open a bank account with debit card access and teach them how to manage their money independently.

• Age 16-18: At this age, many children are thinking about leaving home and becoming independent adults. You can help your kids to prepare for this by teaching them about financial planning, including budgeting, saving, and investing. You can also discuss the importance of credit scores and how to maintain a good credit rating. 

This age is also a good time to talk about student loans if your child is considering higher education and the importance of making informed decisions when it comes to taking on different types of debt. Finally, you may want to talk about how mortgages work. 

Other ideas for how to teach your children about money

Children's Savings Plan and Junior Savings Account

A basic way to teach children about money is to encourage them to save. A children's savings plan or a junior savings account are excellent tools in this regard, helping children save money and learn about money management. 

By opening a children's savings plan or junior savings account for your child, you can teach them about saving, budgeting, and interest. They can also learn about the different types of accounts available, along with what benefits each account comes with.

Pocket Money Card and Pocket Money App

Another way to teach children about money is through using a pocket money card or a pocket money app. 

A pocket money card is essentially a prepaid card that you can load with a set amount of money. Using a pocket money card can teach your child both about budgeting and spending responsibly, as well as introduce them to concepts like bank balances.

Another option is a pocket money app. This is a special smartphone application that allows you to manage your child's pocket money. With a pocket money app, you can set weekly or monthly allowances, track spending, and set specific savings goals. 

Children's Money Box

Prefer a low-tech solution when it comes to teaching children about money? A simple children's money box can be a very effective tool. 

Encourage your child to put a portion of their pocket money or allowance into the money box, or piggy bank, each week. Over time, they will see their savings grow, realising the value of waiting for money to build up.

Teaching about money: always show rather than tell

Regardless of your child's age, there are a few fundamental principles to bear in mind when it comes to teaching them about money. 

Firstly, it's essential to lead by example. While talking about money is a great place to start, children learn most deeply about money when they are given opportunities for hands-on practice. That’s why it’s also important to practice what you preach when it comes to managing your own finances.

Secondly, it's important to make learning about money fun, exciting and engaging. Try to find games, books, and activities that make learning about money enjoyable. This will help to keep your child engaged in the process.

Finally, it's crucial to be patient. Developing good financial habits takes time and effort. It’s important to remain supportive throughout the learning process.

Teaching children about money is an essential aspect of parenting. In doing so, you can help them achieve greater financial independence and better money management skills. Whether your child is a toddler or a teenager, there are many age-appropriate ways to teach them about money. 

Start early and make it a fun and engaging experience to provide them with the tools they’ll need for financial stability later in life.