Start teaching them early and it will pay off later!

Let’s begin with young children. When they’re just little, simply encouraging counting and times-tables is a good start. Learning to count, add and subtract will provide the basis for a child to be able to handle money. 

Once you’re confident your child is able to handle small objects and be less likely to put them in their mouth, you can continue! This means they can handle coins. 

I would be careful though and not introduce this step until you’re 100% confident of this stage in their development.

Have a second money box called a ‘charity box’ to keep all this change. At the end of the year it might add up to £40-50. For your child, seeing the impact of this relatively large amount of money will positively reinforce the giving habit. Try to show them what their money will be used for. For example if it’s a animal charity show them that the £50 is used for caring for poorly puppies or preventing animal cruelty. 

Older kids are professional money wasters

Have you ever seen a child spend the £10 they got for their birthday on utter tat, just for the sake of spending it? Not even a game or doll or piece of clothing or accessory they want, but utter tat? Like a dinosaur key-ring they’ll throw under their bed and find again about 3 years when you force them to do a clearout?

Should I give my children pocket money or an allowance?

There are a few things to decide when it comes to your children and any money they might receive. You can choose whether you want to give your kids an allowance or not. You can give it to them every week or reward them for doing tasks around the house. People take different views on this. 

Some may feel they don’t want their kids to expect the money being given to them so they should do chores/tasks and be rewarded. Others may feel their kids should help around the house in order to contribute to the family and not only do it for money. Some families even impose fines for tasks not being done or bad behaviour (personally I don’t like this approach). It depends how you feel on these issues. 

We’re planning a post on ‘Household Tasks and Pocket Money’ which will be coming soon. In here we talk about having a paid list of jobs the kids can do to ‘earn’ their pocket money. Using their new confidence with change they can use this money to add to a money box.  Keep an eye out for this post coming in the next few weeks!

Train your own little accountant

Encourage them to keep a paper copy of how much they get and on which dates, as well as their spending. My friend did this with her little girl and she felt it heightened her daughter’s appreciation of the value of money. She didn’t want to spend the money she’d accounted for on items that weren’t important to her. 

Introduce your kids to high interest saving!

Don’t be afraid to show your kids where the money comes from!

Maybe the reason that a lot of kids don’t appreciate money is that no-one tells or shows them how it is earned. These details are often thought to be for the eyes of adults only. Then we expect teenagers to become young adults and know exactly how to budget and save and avoid getting into debt. Something seems wrong with that to me. 

Could you take your kids to work one day? Sit them down and explain exactly what you do for a living. 

If you’re a teacher, tell them how many hours you work per week and how many hours you do extra work (such as marking or preparing lessons) that don’t get recognised. Show them your contract.

Should I show my kids my payslip?

Now for a more radical idea. You don’t need to do all these things but it provides an idea of a different approach. You could show them your payslip if you’re comfortable with doing so. This way you can point out the deductions like tax and national insurance, and pensions and student loan repayments. If you’re self employed, you can do the same with your accounts. If you’re unemployed and receiving benefit payments you can show your children each one and how they add up.

Doing this will impart an appreciation in your child of the work you do and how you provide for them. It will introduce the concept of long term saving (pensions) and loan repayments. These lessons can be built upon later. 

When there’s none left show them. Show them your empty purse or wallet (or bank account!) If they’re asking for something and can afford to cover it with their own money, ask them if it’s something they want to put on their budget? Does this now mean they can’t buy the video game or larger toy they’ve been saving for. 

Teen years are where it really counts!

Whether you’ve been encouraging your kids to be money savvy from a young age or not, teenage years are the time when it becomes especially important. 

They now need to manage their own funds, for example birthday gifts and pocket money, with the strict rule that once it’s gone, it’s gone. If you encouraged it in their younger years, they’ll still be keeping their paper account of what they get in. Often older kids begin to slip with this as they spend more regularly. 

Maybe it’s a bit far-fetched for a teenager to keep a paper or spreadsheet budget. However, simply keeping a record of their spends over £20 can be helpful for most. Any sort of budget or record of spending can improve their decision making when it comes to what is a shrewd purchase and what is a needless impulse buy. You could make keeping a budget the one requirement for handing out the pocket money every friday!

Show your older children how banking works

My uncle shows his son and daughter how he manages the family bills and bank accounts. He doesn’t necessarily show the account front page or current account balance but will show them the direct debit list and how me makes payments. He will show them the credit card bill and how it’s paid off. He hopes this will make the subjects of online banking and keeping on top of bills less mystifying as they reach their upper teens. 

Get your child a bank account of their own. This allows them to manage their money, but they won’t (or shouldn’t) have access to credit. Once their balance hits zero there will be no more disposable income until they receive another round of pocket money or their own income. This will encourage saving as they can watch their balance grow, whether it be saving for the long term or for the next big purchase they’re desperate for. You could pay their allowance/pocket money into the bank account. 

Challenge your children to manage their money!

Some parents take their teenager’s budgeting to the next level. Challenge them to look after ALL their expenses from one budget. Work out in your own head how much you spend on them a week for things like food, transport, mobile bills, toiletries and disposable income. Then give them this money one monday morning.

Yes … really! 

You don’t need to go as far as charging them rent but everything else is fair game. They might not be used to being given such a sum of money and might be out of cash by the thursday. If this is the case they can live on bread and beans for the rest of the week and lose access to luxuries like free lifts to see their friends on the saturday. The following week they may take their budgeting efforts more seriously and think twice before buying unnecessary items. Hopefully they’ll still have money left over by the weekend too.

Make it clear your kids can talk to you about money

Whilst taking the stance of there being no extra money available once they’ve spent their lot, it is important to explicitly tell your child or teenager to come to you if they are actually in money trouble. Do they owe money to someone at school? Have they been involved in something they shouldn’t? Is someone stealing from them? The answers to these questions could be of paramount importance to them and to you as their parent. State out loud that if they’re in true need then you can help with money. 

Encourage your kids to learn creative skills early

Why not try….

• Learning Adobe Illustrator or Photoshop
• Learning to produce online videos. 
• Learning computer programming
• Learning web design
• Business skills such as accounting or becoming adept at Microsoft Excel
• Learning practical skills such as DIY 

They don’t have to get in the way of school or exams. These courses can be done slowly or in little bursts when you’re bored of homework. 

It has taken me years to learn how to construct a website and design downloadable resources and templates. I’m only getting into creating videos now. I can only imagine where I’d be if I’d learned 10 years ago. 

In their later teens if they’re struggling to find work or need something to do during school and university holidays, learning these skills can be very fruitful. Having certification in website design or Adobe Photoshop (or courses in accounting and finance) would be excellent additions to a CV when applying for a whole range of jobs.

What financial goals do 18 – 21 year olds have? Help them get there!

Once you have implemented some of the strategies we’ve talked about above, it’s not just money your kids will learn about. They’ll gain confidence, learn the importance of giving and charity, and when they’re older they’ll appreciate the effort you put in today. 

These are the financial education goals I have for my future 18 – 21 year old. 

I want them to

• Know how to budget
• Understand the meaning and dangers of credit, debt and the lack of an emergency fund
• Understand the power of saving and compound interest
• Learn a marketable and/or creative skill
• If going into employment, to manage their wages well
• If becoming a student, to manage their student finance well
• Start saving and investing (small amounts)

I hope the actions we’ve covered will help you help your children reach similar goals. Go and put them into action now! Your kids will be very intrigued!

If you enjoyed this post and found it beneficial, I’d be super grateful if you’d share it with your friends! 

If you use any other techniques that I’ve not covered here, please let us know! Thanks!

A fantastic resource