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Teaching your children about money

Discover some fun ways to teach your children about money to help them develop good financial habits from an early age.

12 ways to teach your children about money

1. Set a money quiz

Set younger children a quiz to help them learn some money basics, with questions that encourage them to see how money works in their world. You could ask which coin is the heaviest and which the most valuable? How much is a pint of milk? Whose picture is on every coin and note? What is a bank? How else can we pay for things rather than using cash?

Answering these questions will usually lead to many more questions for you, so it could be a good way to get a conversation about money started.

2. Learning about earning

Some parents make some or all of their children’s pocket money dependent on carrying out jobs around the home. It’s for you to decide what’s appropriate for your child, but linking achievements to rewards will can help them appreciate that money has to be earned. For older children, you could even establish a basic pocket money system with bonuses for special jobs or achievements.

3. Help them set a pocket money budget

Ask your child to choose things they’d like to spend their pocket money on and help them work out the cost of each. Then ask them to work out how many of those things they could buy with the amount they have. Encourage them to include at least one thing they’d need to save up for over a few weeks or months, and help them plan for that in their budget. One way to do this is by using…

4. Savings jars

Use old jars or plastic containers as a quick and easy way for children to watch their savings grow. You could even encourage them to decorate each one creatively, to represent what they’re saving for. For example, you could glue gift wrapping paper around the container, or sea shells if they’re saving for a day at the beach.

5. Budget for a big day out

Pick an event they’re looking forward to and agree how much they can spend. Then ask them to plan what they’d like to spend on. Give them some tips on what they need to include – it could be a train or bus fares for everyone, tickets to an event, or food and drink. Then let them be in charge on the day, making payments themselves, where possible.

6. Cash-only day

Help your children see the relationship between money and the things we need to buy more clearly by having a day where you only use cash. It could be a simple trip to the shops or a day out – let the children hold at least some of the money, and encourage them to pay shop assistants and receive their change.

7. Show them your budget

Using a laptop or just pen and paper, show them how you budget. You don’t have to reveal your entire household finances if you don’t think that’s appropriate, but you could let them see how you plan to buy the household food for a week, for example. Start with your budgeted amount and then get them to take away the cost of each item on your list.

8. Get them involved in simple fundraising

A money-raising scheme, like selling cupcakes for charity, can also help children to learn some basic money management skills. Get them involved in doing some simple accounts. Keep a list of who owes or has paid, for example, and a running total of how much they’ve raised.

9. Shopping list challenge

Set a shopping list with a target budget (maybe a little higher than you’d normally pay) and challenge your children to find ways to save money while you’re out shopping. If they need some clues, suggest buying supermarket-own brand items instead of big brands, buying multipacks, looking out for special offers and perhaps even sacrificing a luxury item.

10. Share some of your banking jobs with them

Consider getting them involved in some of your regular banking jobs, like checking standing order and Direct Debit payments on a statement, or in your online banking service. If you’re due to make a payment or transfer, let them watch and ask questions. It’s up to you to decide what’s appropriate, but it could help to show them how some basic banking technology works. Just make sure you never accidentally let them see your log-in details, to protect your security.

11. Explain how borrowing works

At some point in their future, they might need to borrow some money, so explain the basic principles. Start with the idea that you shouldn’t borrow money unless you know how and when you can pay it back. You could say explain that banks and similar companies offer to lend people money, as long as they back a little extra so the lender makes a profit (which is called ‘interest’).

Explain different ways of borrowing, like borrowing from a friend or relative. Then move on to short-term options available to adults, like overdrafts and credit cards, to longer-term borrowing like personal loans and mortgages. Don’t forget to mention that paying back money later than promised can mean you have to pay extra to the lender as a penalty for not paying the full amount of interest they expected.

12. Open a bank account for them

Most banks now have accounts designed to get children involved in managing their money. Some even provide a simple level of access online or through an app, and your child could even get their own pre-paid debit card (so they can never spend more than they have in the account).

It’s for you to decide what’s appropriate for your child, so look out for the account features you think are right. And remember that having a current account could help your children build a healthy credit history for when they become adults.

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