6 lessons to teach your children about money

03 June 2021



Kids and money… some of them are little hoarders, always building up their stash that older siblings try and come up with ever-more inventive ideas to get access to! Many, many other children are not so frugal at all – the minute they get a few bob, they can’t get to the shops quick enough to spend it.


Minding their money is a really important life lesson for children, and parents are always going to be the primary advisers to help their kids navigate their financial lives. So where do you start?


We’ve set out a few useful lessons to teach about money, starting with lessons for the very young. We’ll then move onto thoughts for older children through to young adults.



Think of bigger treats

A really good starting point, the goal of this is to encourage the habit of saving. As children receive money either as gifts or as pocket money, gently dissuade them from running to the shops and wasting it all. Instead help them to identify a toy, game or gadget that they really want and encourage them to save some of their money towards this. You can then help them along the way by praising their progress and encouraging them to keep going, maybe even building in little savings bonuses. Kids will learn that by looking after the pennies, the pounds look after themselves. Small amounts make a difference, given the benefit of time and commitment.



Be suspicious of great deals

Children thankfully don’t start out thinking that there are lots of people out there just looking to rip them off, what a horrible way that would be to grow up. But as children become independent in terms of purchasing goods and services, we need to teach them some financial realities. Central to these is that if something looks too good to be true, it usually is. Shiny expensive items at knockdown prices have to examined with a lot of caution, so teach your children to seek your “2nd opinion” before they take the plunge with a seemingly great deal.



Understand how debt works

Now we’re moving towards the older children, who can quickly make quite significant financial mistakes. Often these mistakes centre around debt. Children need to learn to plan large purchases carefully and that the default should always be to save for these purchases such as holidays in advance. Upfront enjoyment is often followed by months or years of misery as the debt needs to be repaid. Debt needs to be treated with a lot of caution and children should particularly avoid expensive debt that comes with using credit cards.



Share your own war stories

Look, we’ve all made mistakes over the years. Maybe you made a seriously bad purchase or were the innocent victim of some scam. Maybe you let your credit card get out of control at some stage or didn’t get proper independent financial advice early enough in your life. The good news is that you’ve lived to tell the tale! Tell your children your war stories, about lessons you’ve learned and how they can avoid making the same ones themselves.



Have a financial plan

We’re not suggesting that your children need a financial plan as detailed as your own when they are in their late teens or twenties. But they should have a basic plan that will keep them focused on relevant objectives. These might be saving towards a car or the deposit for a mortgage or just getting their own health insurance in place. Having a plan keeps them focused on objectives and typically leads to much better financial behaviours.


Pensions are not for old people

Research shows that for every 10 years earlier that a pension is started, the fund ends up roughly double in size. This is as a result of the combination of more contributions, increased time, investment returns and the magic of compound interest. Pensions are for wise young people with a view on prosperity and an easier life down the road.


These are just some of the lessons to teach your kids. At the end of the day, it all comes back to them understanding how easy it is to waste money. With a little focus and commitment to good financial behaviours, they can quickly start building a brighter financial future for themselves.