Talking to children about money

Teaching young children about money makes them better-off in the long-run.

A research project running since the 1970s found kids who were taught about saving were more likely to have a decent pension in later life. Budgeting skills meant less debt. Awareness of real-life costs makes people shop around.

For the under 5s

You can improve the financial knowledge of a child by involving them with financial decisions as soon as possible.

In the supermarket and need to buy ketchup? Ask a child to help choose, based on your budget and the price of the different brands. You could also allow them a set amount of money to pick something from the shop. Be clear that ‘when it’s gone it’s gone’. Talk about the choice they made and what they might do differently next time.

Here’s a video with some real-life examples:

Children in this age group can also learn to recognise different coins. Notes are worth more than pennies. Money should be kept safe.

For the under 10s

With some maths under their belts, kids can now learn the correct value of coins and notes.

You can show children that some things cost more than others. Toys. Buses. Chocolate. They vary in cost. They all have different benefits. What’s the advantage of spending on certain things over others? If you spend all your money on toys and have nothing left for the bus, what are the consequences? A long walk home in the rain?

This is probably the age when your children might think about a bigger purchase. As a result, they may develop savings goals. A toy or football kit might be out of reach today. But saving small bits of pocket and birthday money can help them reach their goal. How long will it take to have enough money? What are the consequences of temptation and an early spend on something else?

If the youngster doesn’t have a savings account, why not open a Junior savings account with the Credit Union?


If older children have started earning pocket money, can they keep track of their hard-earned cash? A recent survey found only half of 15-17-year olds who receive money keep track of their income and spending.

Teenage years are a great opportunity to teach the difference between wants and needs. Our earlier post about the 50/30/20 rule will help. To recap. 50% of your budget should pay for your needs – the kind of things you can’t do without. Like rent, bills, food and transport. 30% of your money should go towards ‘wants’. This is non-essential shopping  like sweets, holidays and outings. The remaining 20% is for plans, especially saving.

It is a good time to build on what they know about real life costs. If they dream of owning a car, explain the cost of MOTs, insurance and general maintenance. Could they budget for a week’s worth of food without overspending?

Part of teaching your teenagers how to manage their finances comes down to being strict with the money you give them. Not bailing them out if they overspend.

Here’s a video produced by teenagers kicking off a conversation about money with their peers:

But what about the parents or guardians?

Martin Lewis has produced 55 tips to save money if you’ve got kids.

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