How to teach your kids about money

Get your children into good financial habits from the beginning

Iona Bain – Virgin Money Living Mentor

by Iona Bain | Independent Money Mentor

Founder of the Young Money Blog and author of Spare Change

Being a parent is wonderful. But lord knows it isn’t easy! And talking to our children about money is a particularly daunting prospect – especially if our own financial management is, less than entirely perfect (be honest). Perhaps that’s why research has consistently shown that most parents would be more comfortable discussing sex than savings with their kids.

But we need to tackle the pounds and the pennies as well as the birds and the bees. We form our financial attitudes by the age of eight (yes, really). And there is no guarantee that our children will learn what they need to about money in school. You’re the best teacher they have, and while you might not be Warren Buffett, you’re probably a lot better than you think.

All it takes are healthy habits and solid common sense. Passing these on will pay off enormously, helping the next generation to sidestep expensive debt and save for the future. The sooner your kids start to see what ‘good’ money management looks like, the better.

But there’s no point pausing Peppa Pig to try to explain the Libor rate to your children: this will be met only with justified howls of rage. Your wisdom has to be age-appropriate. And at the earliest ages, you can simply lead by example; make a display of budgeting, saving and disciplined spending so the lessons go in deep.

Primary school children can get to grips with money – literally – by counting out physical coins and notes; talk to them about the different sizes, colours and numbers. Explain that money is what we use to pay for things. Tell them how much stuff costs to give them an idea of “value”, and demonstrate that money can be “cashless” by showing them your debit card and your online bank account. Discuss your income and what you do to get it. They’ll quickly make the connection (ding!) between working and earning money.

Put that connection into practice with an allowance and a “pay by chore” model. An eight year old typically gets £4.44 per week, rising to £5.65 for 11 year olds. Once you settle on the amount, don’t be tempted to give handouts, no matter how fiendishly your kids chip away at you.

Get them involved in setting up a savings account and coax them into squirrelling away at least ten per cent of their allowance. Discuss their spending goals. What do they want to buy and how much would they need to save?

Secondary school kids should graduate to a monthly allowance and the use of budgeting apps. They may move away from paid chores into real part-time jobs to understand the world of work. Get them to help you by finding the best deals on your weekly shop and utility bills. Ask them to study the small print, weigh up the warranty and consider the cost per unit. Any child going into higher education also needs a serious chat about easy credit; an overdraft isn’t an invitation to spend. Make sure teenagers are already in the habit of budgeting, getting good value and saving (what they can) before they pack up their miniature fridge and head off to university.

Follow these guidelines and who knows? Maybe in due course, they’ll be the ones teaching you a thing or two about money management.

Apps and resources to give you a helping hand

  • Osper is a good option for older kids because it provides a physical debit card as well as a budgeting app that your kids can download, and parents can also easily deposit money into their children's accounts by downloading the app themselves.
  • is a good source of interactive money games to educate children about money. The Fantasy Stock Exchange turns investing into a fun competition with prizes for the shrewdest young virtual traders (although no real money is invested, so there is no risk that your children will accidentally gamble their pocket money away).

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.