Teaching kids about money

Helping kids understand the value of money, ways to manage it and how to budget as they grow up is a great way to build their confidence and independence. Not sure where to start? We’ve put together a handy guide with some ideas on how to get going. Plus, we’ve designed a bank account especially for kids, which can be opened when they’re aged 11 to 15 and kept until they turn 18. Our M Power current account is a fantastic way for children to learn how to manage their own money, with the added safety of parental oversight.

Read on for our guide and get the conversation started.

Ways to teach money basics:

• Talk about money
  
  Rather than a one-off conversation, talking about money can become a natural part of everyday life. Make money topics feel more approachable by involving your child in day-to-day decisions to help build their confidence.
  
  For example, you could talk about how you budget to pay bills before treats. Or for younger kids, you could show them different notes and talk about what they could buy with them.
• Explain how money is earned
  
  Tell your children about how you earn money so they understand where it comes from. Explain that you work to earn the money that allows you to pay for your house, your car and your food.
• Show them different ways to pay
  
  Explain that there are different ways to pay for things. Aside from contactless payments and using digital wallets to pay using your mobile phone, talk through cash and debit cards, and explain the pros and cons of each. For example, contactless payments are quick and easy but there’s a limit to how much you can spend in one transaction and sometimes you might be asked to enter your PIN. And while debit cards are a better way of paying for larger purchases, cash is great when paying for smaller items at the corner shop.

Understanding the value of money

Our recent research into how young people think about money revealed that 11 to 17-year-olds tend to rely on being given money, rather than earning it, which can skew their perception of its value.

In fact, 84% of the children surveyed were given cash as pocket money or as a gift from family and friends. This is opposed to the 55% earning their own money through chores and part-time work.

To help kids understand the true value of money, it can be helpful to start earning and managing their own funds. Not only does this give them independence, but it can help them to make smart and responsible spending decisions. Our M Power current account is a child bank account with a linked savings account that allows children to set up savings pots and goals, helping them to be more mindful about their money.

Ways to teach your child the value of money:

• Set savings challenges
  
  To make things fun, you could set savings challenges to help them practice. For example, you could challenge them to save £5 of their pocket money each week, so they’ll end up with £260 by the end of a (non-leap!) year. Using the savings pots that come free with the linked savings account can help them to learn more about saving their money, as they can see themselves reaching their savings goal(s)!
  
  Or you could give them a budget to go around the supermarket and buy a meal for the family, the catch being that they need to save enough cash to buy dessert too.
• Work together on budgeting
  
  Teaching your child about the difference between needing and wanting is a valuable life lesson and a brilliant way to introduce the idea of saving. With the money they have in their account, you can work with them to figure out how to budget, save and spend to afford things on their wish lists.
• Let them earn some money
  
  Offer them opportunities to earn cash around the house. They could complete paid chores, help out with babysitting, or even sell some of their old toys, games and clothes for extra money.

Building confidence in managing their own money

As your child gets older, it’s important you help them to feel more financially independent. Setting up a bank account with parental oversight is a smart way to do this. Our M Power current account is a child bank account that has some fantastic features to give you peace of mind, including:

• It’s a fee-free account, and up to five M Power Accounts can be linked to one parent’s account
• Linked parental app so you can see when, where and how much your child is spending, and set up spend alerts
• We automatically block spending on certain over-18s websites
• There’s no arranged overdraft, so there’s no overspending
• Ability to freeze debit card instantly in the app
• Ability to set up savings pots
• Can grow money with their linked saver

As your child grows, the amount of control you want to have over their money will naturally change. Your role can evolve to being less hands-on while supporting good financial habits, focusing more on things like budgets and money management tips, as opposed to setting limits.

Ways to build your child’s confidence with money:

• Let them manage their own money
  
  Showing trust in your child’s ability to manage their money will massively build their confidence. When they’re very young, you could get them a piggy bank to keep their money safe and get them excited by the idea of filling it up with their savings.
  
  When they’re old enough for a kid’s bank account, get them involved in setting up their own and explain how it works.
• Reward them for hitting savings goals
  
  Discuss setting up an agreement with your child about rewards for hitting savings targets. These don’t have to be huge. For example, if they manage to save £10 one month, they could choose what you have for dinner one night. Just make sure you keep all goals realistic and achievable so your child feels motivated and engaged.
• Talk to them about security
  
  It’s really important you let them know how important it is they keep their personal details safe. They should never share their passwords, cards or PIN with anyone.

Now you’re ready to teach your child the value of money, it’s important you get them set up with a safe, secure and super-savvy children’s bank account. Find out more about our M Power current account, our child bank account that is free, easy to use and built to give you peace of mind.

Terms and exclusions apply. Child must have their own mobile number, live in the UK and be aged 11-15 at application. Parents/Guardians who have, or open, a Virgin Money current account can only apply for an M Power Account on behalf of the child in the Virgin Money Mobile Banking app. Virgin Money is a trading name of Clydesdale Bank PLC.