Talking to children & young people about money

Have you ever spoken to a young person about money and realised they have little understanding of its value? It’s not their fault and it doesn’t surprise me, day-to-day finance isn’t featured much in the curriculum, even though financial education is critical to growing up.

Teaching children about money provides them with the tools and knowledge they need to manage their own wealth, now and as they get older.

So, how do we talk to kids and teenagers about money? 

The sooner you start developing their financial skills, the easier it will be for them to get a good understanding of money and build confidence in the subject.

Younger children (from 5-8 years)

Don’t be afraid to start young. Children often learn by watching so why not take them shopping with you? It can be a short trip to the local express store if that’s easier! Try to: 

• Make money-related decisions out loud and get them involved. For instance, why you chose to buy a cheaper or more expensive alternative of a certain product e.g. bread. 
• Get them to try and read the prices off the shelf and explain that not everything costs the same amount. 
• Ask them to load the shopping at the till and hand over the money.
• Check your receipt in front of them.

Understanding money in its most basic sense is important, too. Try counting pennies:

• At a table, spread out lots of different coins.
• Build a pile of 1p coins to make up the value of the 20p coin next to it. 
• You can do the same for 2p coins and 50p, and so on.
• Take down the piles and ask them to recreate them.

Introduce the concept of saving money using a piggy or money bank: 

• Talk about and choose something they really want to buy, then help them to regularly put money in the piggy bank (whether it be pocket money, birthday money, or similar). 
• Keep counting the amount and explain to them how it is accumulating and when they are likely to have enough to buy their desired item.

Get them used to digital money

For most of us, using mobile phones and other tech is just part of life. Cash is more of a rarity than ‘digital money’ (e.g. your card) these days. So, don’t forget to show children that, although they can’t physically touch it, the money they see in your online bank account is real, too. The important thing here is to show them that it can still run out or be topped up. 

A good exercise is:

• Show them the balance on your account via a cash machine or online banking. 
• Use your card to shop for food, then show them the balance again, highlighting how it’s less than before.

‘Grandpa's Fortune Fables’, a book by Will Rainey (writer and speaker focused on helping parents teach their kids about money), is a great resource for kids from ages 7-13.

Older children (9-13 years)

You can use the same concept of a money bank, as explained above, to help kids understand saving money. 

It’s also a good idea to get them used to earning money, too:

• You could give them the opportunity to add to their money bank by doing some light chores around the house in exchange for pocket money. 
• Ask them how they feel about earning their own money (hopefully satisfied or accomplished!) and what they plan to spend it on.
• As they get older, you could gradually increase their pocket money, if you have the means to. When you feel confident, they can take over the spending for things like their own toiletries, clothing, and social activities. Worth keeping an eye on this, though otherwise, they may end up with several branded t-shirts but no shampoo!
• If their monthly allowance disappears too soon, discuss breaking it down into four weekly amounts and ways of making these last a week. Likewise, if they complain that they can’t afford the latest trainers, discuss saving using the money bank technique above. 
• 12-13 years of age is also a good time to introduce a personal bank account instead of a piggy bank if you feel comfortable. 

Giving them the freedom to manage their own budget will teach them two valuable lessons:

1. Only spend what you can afford.
2. Avoid the pitfalls of unplanned expenses.

Teenagers

The teenage years are still a great time to show kids how to earn money around the house - see above for more guidance. But, as they get older they will be able to get a part-time job of their own. 

Understanding payslips is key here. Discuss their first few payslips with them, asking:

• What is their hourly rate and does this change with overtime?
• What is the difference between gross pay and net pay?
• What are the National Insurance and tax deductions?

A job will increase the amount of cash available to teenagers - the perfect time to reinstate the importance of saving. This could be for a large expense such as a car, or simply saving for a rainy day. You can show them how to set up a standing order so that the savings are sent to a separate account or ‘pot’ each payday so it is easier for them to stick to.

When helping them decide how much to save from their wages, talk through:

• How much are their weekly (necessary) expenses?
• How much does their social life cost?
• Are they saving for anything in particular, such as a car or university?
• What is their ideal ‘rainy-day’ fund?
• How much is their income?

Talking about money with kids doesn’t have to be awkward or difficult, transparency is key and it will help them out in the long run. It can even be fun! 

For more in-depth information on what children understand about money at each age range this resource provides a good guide.