Dan Scholey, COO of Moneyhub, shares his top tips on how to teach children about money:
With schools now closed for the foreseeable future, parents across the UK will suddenly find themselves at home with their children having to support with their learning and education. One positive outcome is that it will give families the chance to teach the next generation, giving them greater awareness of day-to-day life-lessons like the family finances – things that are not taught at school.
So what can parents or family members teach children about finances while they are learning at home?
1. Set them savings goals
Setting savings goals – a new toy, game or even more pocket money earned from extra jobs around the house – encourages children to budget and work toward an individual goal. It can be fun, too – which children don’t like being set a good challenge? Set a realistic, age-appropriate amount, which they can use to buy something online that that really want. And once they reach it, not only do they see the impact of saving, but it’s teaching them to be in control of their money which sets them on the path to financial independence for the longer term.
2. Bring money to life
For children at primary-school age, there are practical ways of teaching basic arithmetic. Take a receipt and ask them to work out how many different combinations of coins make up the amount - so £2.50 could be two £1 coins and a 50p coin. Or put up a snack list with prices (high sugar items cost more, low sugar less) with each child being allowed to spend up to £1 per day. Not only does this teach children the value of money, but it’s a useful tool to give them a better understanding of budgeting, and given the current circumstances, rationing too!
3. Use money apps for children
Engaging children in money is increasingly important as we move into a digital, cashless world. The days where children would be sent a cheque for their birthday are disappearing. Instead, pocket money is set up as a standing order, children have their own debit cards, or credit cards are given as an eighteenth birthday gift. Children are used to using apps from a very early age, so it makes sense to utilise these tools to bring money to life and make finance fun.
4. Start backwards
It might seem strange to talk to a child about pensions, but children can learn a lot about saving from older generations. Speak to a retiree and you might find that there are lessons in money they wish they knew earlier in life. Could they have saved more had they started earlier? Would they have a bigger pension pot if they had known about pensions from childhood? It’s never too early to start saving for retirement, and the earlier in life people know about it, the sooner they can start to prepare.
5. Don’t underestimate children’s financial understanding
It would be a mistake to underestimate children’s ability to understand and engage with finances. Stereotypes about young people wasting their money on pointless meals and beauty products get in the way of teaching them positive messages. Why can’t they buy that expensive coffee or avocado toast, as long as they’ve budgeted it effectively? While they can’t yet start investing, they can change behaviour toward budgeting and saving. If you have a Junior ISA for your child, it’s worth letting them see it so that they can see a longer-term view of how money works in real life, as well as getting them more familiar with the ups and downs of investing.
6. Small savings make big differences
Lots of banks and money apps now give users the option of sweeping money into a separate savings pot. This feature can work well for children with debit cards too. Sweep 30p on a packet of biscuits and whilst it might not seem like much, it won't take long to accumulate in the long run. What’s more, children can see what it looks like for money to grow over time, instilling good habits early on and paving the way for bolder decisions like investing.
Find more resources to help teach your children about money.