Five tips to teach your child about money

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As parents, we help shape our children’s understanding of the world they live in. Which is why it’s so important to start educating them about money from a young age - even if we’re not sure they’re ready.

Research has found that kids can grasp financial concepts from toddlerhood, and by age seven, many already have set money habits. So it’s never too soon to introduce the value of money and financial responsibility to the next generation.

Here are five tips to teach your child about money.

Don’t be afraid to lead by example

Many of us have baggage when it comes to money, but we can’t let our insecurity or negative past experiences with issues like debt affect our kids. Honest, open conversations are key to building a healthy relationship with money - and it’s never too late to improve on our own spending and savings habits.

Practically explaining and showing kids money (cash, coins, cards, how money is represented online) is a starting point, so they can learn to visualise and understand what it looks like when money is spent as opposed to saved. Take them through an online shopping experience, explain deals and discounts and illustrate how money is required for certain purchases every week or month. If there’s extra, then that can be put away, donated to charity or invested.

Teaching them how to be savvy when it comes to finances is part of an education they’re unlikely to be taught in school. If you’re charity shopping for bargains, or buying in bulk to get better deals, turn those experiences into teachable moments.

The kids might even enjoy an introduction to comparison shopping with sites like Compare the Market, where they can see what your family is spending on bills compared to others in the neighbourhood, as well as learning how adults like to shop around for cheap deals in order to trim their bills.

Consider a pocket money app

As we move towards a cashless society, kids’ prepaid debit cards are becoming ever-more-important tools in their financial toolkits. There are numerous pocket money apps/debit cards to choose from like nimbl, RoosterMoneyand GoHenry, which largely do the same thing but have slightly different costs and extras. Most are suitable for kids from age five or six.

These cards and apps combine gamification and incentives with real-world lessons about savings and managing money. Parents can set spending controls, pocket money can be transferred to children via the apps and kids can start learning how to save and manage money through in-app games and incentives (GoHenry has just launched Money Missions, which teaches kids about compound interest, savings, investing and more).

NatWest’s Island Saver games are also online tools where kids collect coins as they clean up virtual trash, while learning the basics of saving in the process.

Encourage them to earn some money

Making money a tangible thing they have to work towards can help kids get to grips with the basics. The general consensus from experts is that weekly or monthly pocket money is a good thing for kids (although there is some disagreement as to whether kids should be paid for doing chores around the house or not - that’s your call).

Even better than handing your kids a couple of quid each week? Encouraging them to earn some money. For older kids, this can involve helping neighbours or starting a DIY business, making jewellery or lemonade.

They can also clear out their clutter by selling any old toys or games. The process of waiting around to make a sale might be just what they need in order to understand that it isn’t always easy to come by money.

Finally, being candid about what things cost and how they’re valued can help kids learn the basics behind saving and budgeting for big-ticket items. Helping them understand the difference between items they want and those they need is integral to this process.

Educate them about scammers and sponcon

Research has found that by age seven, 53% of children in the UK have their own mobile phone.While a phone is a gateway to learning and socialising with peers, it’s also important that you have regular conversations about what kids are being exposed to - this will not only protect the kids, but also your credit card. In-app purchases, particularly in kids’ mobile games, can result in hundreds or even thousands of pounds being drained from a parent’s card, in mere minutes.

Discussing online spending and in-app purchases is a start, alerting kids to online scams - sent via messages, WhatsApp, emails and social media sites - is also crucial. Show kids what these scam emails might look like (misspellings, strange email addresses, demands for credit card details and other personal info), and be sure they’re aware they should never release any personal information online.

It’s also worth discussing the various types of advertisements kids are bombarded with online, from algorithmic targeting to influencers, offers to be “ambassadors” and celebrities posting sponsored content they are paid to promote. This kind of advertising is often so subtle that adults can’t always decode what exactly is being sold.

Embrace tech as a learning tool

Tech can streamline the process when it comes to educating children about the foundations of finance. We’re not just talking about the popularity of prepaid debit cards with apps and gamified features, but the tech that kids typically gravitate towards, like video games, can prove instrumental in teaching kids about money. They’re introduced to new currencies (Fortnite’s V-Bucks, Animal Crossing’s Bells), as well as the basics of buying and selling. Many games also incentivise players to start “saving” to acquire customised skins and accessories.

One final thought? Our children are not always going to spend money on what we want them to. But ensuring you’re someone they feel comfortable talking to once they start making financial decisions - and, inevitably, mistakes - is a money lesson all on its own.

For more tips on how to teach your child about money, check out Meerkat Your Life