Teaching children about money from a young age is extremely important, setting them up for financial success in the future. After all, children are like sponges and absorb information quickly, so if we help them learn and develop healthy money habits as early as possible, this will hopefully stay with them throughout the rest of their lives.
We understand that talking about money can be a sensitive topic for many people, but it doesn’t have to be. The sooner we start talking about money to younger people, the better.
According to the 2022-2023 Young Person’s Index by The London Institute of Banking and Finance, 82% of young people want to learn more about money and finance in school.
Additionally, 85% of 17-18-year-olds admit they worry about money and their personal finances, highlighting just how important it is for us to start educating young people about money as soon as possible. Our customers have an average age of 53 and have an average of eight debts totalling around £18k, which is why we want to help young people manage their money better from an early age.
With this in mind, in this guide we take a look at the reasons why financial education is so important, outline how to teach your kids about money and debt, and provide our top tips for making learning about money fun for children.
How to teach kids about money
According to the same report mentioned above, over two-thirds (68%) of young people get their financial understanding and knowledge from their parents. For this reason, it’s essential that parents, grandparents, and guardians ensure that they’re passing on good money advice. But how can this advice be effectively passed on?
Well, at MoneyPlus we believe teaching kids about money should start by making the subject as engaging and practical as possible. Start with basic concepts like saving and spending then try to use real life examples and situations, such as saving pocket money to afford sweets or a new toy they want, for instance.
Incorporating fun activities, such as playing money-related games like Monopoly or setting up a pretend shop can also be a fun and engaging way to teach basic skills. As we will discuss in more detail below, including your children in family budget discussions to show the real-life applications of saving and spending is also a good idea.
How to make money fun and interesting for children
If you’re looking for fun and engaging ways to teach your children about the importance of money, we’ve put together some top saving tips for the younger generation to help them avoid getting into debt.
1. Set up saving jars
Using a piggy bank is a simple way to encourage children to save money. But if you’re looking for a cheaper and easier option, you could use a clear glass jar or plastic container as an alternative. You could decorate the jars with craft supplies to make them more fun and spark some creativity. If your child is saving for something specific, such as a certain toy or towards a special day out, why not help them decorate the jar in that theme?
2. Budget pocket money
If you give your child pocket money, you could ask them if there’s anything in particular they want to spend the money on. If there are a few things they want to put the money towards, you could explain the cost of each item and how they can budget towards this. Explain how many weeks/months it would take for them to save for each item and plan a suitable budget to help them understand how far their pocket money will go.
3. Give a reward
To help your child understand the importance of earning their own money, you could ask them to complete chores around the house for a financial reward. Having them participate in jobs such as watering house plants, taking the rubbish out, vacuuming, or setting the table will give them a sense of accomplishment. It’ll also make them appreciate the money more as they’ve had to earn it, rather than it being handed to them.
4. Put them in charge for a day
Why not put your little one in charge of money for the day? Set an amount they can spend beforehand and give them full reign on what they can do. Explain that the money needs to last the whole day. Help them factor in costs for travel (such as petrol, bus, or train fare) food and drinks, and ticket prices if required. Have them tap the card to pay or hand cash over to the cashier, as this will give them a sense of responsibility.
5. Include them in family budget discussions
When you have discussions about budgeting, make sure to include the kids when appropriate. For example, if you have a family holiday coming up, allow them to help organise the trip, and you could even include them in discussions about flight costs, accommodation, and excursions. Ask them to help research the holiday, and you can show them how to find cheaper alternatives to suit the budget.
6. Play games involving money
A great way to engage your child with money talk is to play games such as Monopoly, Game of Life, or, if your child is younger, you could even teach them how to sort and stack money. These are fun, easy games you can play together to help them understand how money works. Alternatively, you could roleplay games such as ‘shop’ or ‘restaurant’ where they deal with money and have to work out the different costs.
7. Participate in the grocery shop
When children partake in an activity, it helps them learn. A trip to the grocery store is an excellent way to teach kids all about money, especially spending. Not only will they see how you budget, but you can show them tips and tricks to save money on products like reduced items or Buy One Get One Free offers.
8. Read books about money
As with most things, when teaching children about a particular topic, books are always a great way to help them understand. Specific books aimed at children explain everything about earning, saving, and spending. Reading books about money can encourage children to ask questions and allow you to open up the conversation for them to feel confident enough to discuss money with you in the future.
Why financial education is important
Put simply, financial education is crucial because it empowers individuals – particularly children – with the knowledge and skills needed to make informed and effective financial decisions throughout their lives. By understanding concepts such as budgeting, saving, investing, and debt management, individuals can avoid common financial pitfalls and achieve greater financial stability and security.
Naturally, the earlier a person is taught these skills, the better. However, teaching children these key life skills is easier said than done.
Is financial literacy taught in schools?
Although financial literacy is included in the national curriculum in the UK – particularly within subjects like mathematic and citizenship education – the level to which this topic is covered does vary. Themes such as budgeting, saving, and understanding financial products are usually taught in secondary school citizenship education, however, these topics are not assessed in the same way as other key subjects such as maths and English.
As mentioned above, despite these efforts, many young people still feel unprepared for financial challenges, as indicated by the Young Person’s Money index. This suggests that while financial education does occur, it may not be comprehensive or practical enough.
Some schools offer additional personal finance courses, but the depth and quality can vary. With this in mind, parents and guardians may play a more crucial role in supplementing this education to ensure that children develop strong money management skills.
With the right approach, discussing money with the younger generation can be a fun, educational and engaging experience. Giving children and young people helpful information and encouraging them to use good money habits from an early age can be beneficial for them.
Hopefully, the money tips outlined above are useful for your children to understand everything from budgeting, saving, and spending, to wanting to talk more openly about the topic without it seeming overwhelming.
