This year, Cubs and Beavers in North London began trialling a new badge aimed at teaching children about money. The badge is designed to help kids understand "in-app" purchases, the way money works online and in shops, and to make decisions about their spending by encouraging them to take part in various activities involving money, such as budgeting for a camp meal.
The new scheme, which is being sponsored by HSBC, is helping to fill the gap in learning about money that most school curriculums don't cover.
While kids are usually introduced to the basic concept of money in maths classes at school, the extent of their understanding of how money actually works can be limited to the simple addition and subtraction problems in textbooks. The importance and complexities of money, and its role in how the world works, is not necessarily taught in the classroom, so in many cases it comes down to parents to teach their children by themselves.
In this article, we explain 5 different ways that you can teach your kids about money - from simple conversations to have around the dinner table to mobile apps you can use to encourage your children to save up their pocket money - and explain some of the basic money principles that you should teach your kids to help prepare them to be responsible adults.
1) Make money part of the everyday
Although it can be tempting for parents to shield money matters from their children, it’s vital to introduce young kids to the concept from as young an age as possible. Research in the UK from Cambridge University suggests that the money habits kids carry into adulthood may be set by the age of just 7 years old - so the earlier you start, the better.
This can be as simple as talking about money - such as the cost of an item of clothing or your weekly grocery shop - in front of your children, or gifting them a piggy bank to introduce them to the idea of saving. At early ages, it doesn’t need to be anything sophisticated, but ensuring that money is a concept in their peripheral that they encounter in daily life helps to prepare them for when they start using it by themselves as teenagers.
Let them see you use money
The easiest way to introduce children to the concept of money is for them to see it being used in day-to-day life. Although we use cash less and less these days, particularly in the post-pandemic world, cash is a crucial instrument for showing children how money physically transfers from one person to another.
Simply tapping a debit card at the till to pay for your groceries can be misleading, because you don’t get to see any actual money changing hands during the transaction, but seeing you pay for things with notes and coins helps to instil in children a better understanding of the value of money. Try to include your children in transactions as much as possible - for example, get your kids to count exactly how many coins are needed to pay for what you’ve bought from the local newsagent’s - so that they can begin practicing arithmetic while also learning about the purchasing power of money.
Create opportunities for them to earn money
Lots of us can remember being given pocket money in exchange for completing chores as a child, and this age-old technique is actually one of the most effective ways of teaching kids about money. It helps them to learn that the old saying that "money doesn’t grow on trees" is true: it needs to be earned.
Getting your kids to regularly undertake tasks in exchange for pocket money shows them that money is earned through time and effort, while still keeping it fun by rewarding them for their hard work. All it takes is to make a simple checklist of weekly household chores, each one worth a small amount of money, and encouraging your kids to complete as many as possible so that they can afford to buy themselves a treat at the end of the week or month.
The Child Development Institute has compiled a list of chores suitable for children of different age groups, which can help you to create tasks best suited for the unique developmental stage your child is at.
2) Teach your kids about basic personal finance
The extent to which children learn about money in school is often quite limited. Most schools will introduce kids to the concept of money in maths classes, usually while explaining adding and subtracting, but for many primary school children that can be the extent of what they learn about money in the classroom. Personal finance - be it how to save money, how taxes work, why you have to pay bills - is rarely, if at all, touched on in the curriculum.
Introducing your kids to the basics of personal finance doesn’t have to be complicated, and it’s better to keep it as simple as possible so they can develop a good grasp of the topic. A simple sit-down conversation about why we pay tax, for example, can help to situate their understanding of money alongside the daily financial decisions that we make in adulthood.
Below are some helpful ideas of how to teach your children about 3 key personal finance matters:
This is one of the easiest and yet most important financial principles to teach your kids, and you can start this one from a very young age. If you’re already encouraging your children to complete chores in exchange for pocket money, introducing the idea of saving is quite simple. Get your kids to pick something they want to buy (such as a games console or an expensive toy), calculate how long it will take them to save up in order to be able to afford it, then make sure that they do their chores to get their reward. Not only does this reinforce the fact that money is earned through work, but it also helps them to develop good money habits by practicing saving up.
The idea of explaining how tax works to children can be understandably daunting, but you don’t need to go into a great deal of detail to help them understand the basic principle. An easy example could be to explain how the NHS is funded through taxation, so that you can ground their comprehension of tax into something most children have encountered before, and instil in them an appreciation for how tax is used to provide and improve valuable social services which many of us depend on in day-to-day life.
Many children may not understand that seemingly basic needs, such as electricity and water, are only provided because we pay for them. Because it only takes a flick of a light switch or a turn of a tap, kids may not realise that it costs money to have access to these essential commodities. Reminding children that we pay a monthly fee to use them can help to encourage kids to be more mindful of their usage. Simply prompting them to turn the lights off when they leave a room, or not to leave the tap running once they’ve finished using it, keeps the concept of money at the forefront of their everyday activities.
3) Use apps to teach your kids about money
Children are spending increasing amounts of time on their mobile phones, so why not incorporate learning about money into something they’re already spending hours of the day looking at?
RoosterMoney* was launched in 2016 and aims to "educate, motivate and empower" children financially. It’s a pocket-money app that allows both children and parents to manage their pocket money from the same account. It allows you to teach your children about money and give them financial independence while still having control over their finances. For more information, check out our independent RoosterMoney review.
Launched in 2021, GoHenry is a pocket-money app that was developed by parents who wanted to teach their kids about how to manage money without getting into debt. GoHenry offers an account that can be monitored by a parent while giving children between the ages of 6 and 18 the freedom and independence to manage their own money. To learn more about GoHenry, visit our article "GoHenry - the best pocket money app?"
Nimbl is an app designed to "develop good money habits" with a prepaid debit card and linked mobile accounts for both parents and children. It allows you to set up regular pocket money payments to be paid into your child’s account, and sends instant alerts directly to your phone to show you when, where and how much your child has spent on their Nimbl card. You can find out more about Nimbl in our list of the best pocket money apps in the UK.
4) Use board games to teach kids about money
This is a fun and easy way to incorporate learning about money into your children's daily lives. Encourage them to put their phones and tablets down for a little while and play some good, old-fashioned board games. Not only are there several which can teach kids valuable lessons about money, but they can be a good opportunity to spend time together as a family.
Buy It Right
This 2-4 player game is suitable for ages 6+ and is a great way to introduce kids to how money is used in day-to-day life. It involves buying and selling items, setting prices for goods, and learning how to make change. The objective of the game is to move around the board buying items and using realistic fake notes and coins to purchase them.
This is a kid-friendly, 5+ version of the family favourite, designed to be more colourful and less time-consuming than the original version. The game uses just single $1 bills for simple transactions, making it a great way to get kids to practice some basic mental arithmetic, while also encouraging them to aspire to own equity in “properties” such as pet stores or game arcades.
This 7+ game for 2-4 players is ideal for teaching kids basic adding and subtracting, but also instills a strong work ethic, encouraging entrepreneurship by starting their own businesses such as a lemonade stand or lawn mowing service. It uses realistic-looking coins and notes but also a colourful, cartoonish board to keep it fast and fun.
5) Model good financial behaviour
Arguably the most important aspect of teaching your children about money is how they see you using it yourself. If you’re saddled with credit-card debt but still going on shopping sprees, you’re going to send your kids mixed messages about how to responsibly manage money.
Ultimately, your children look up to you for inspiration and guidance, and this applies to financial decisions too. If you want your kids to be sensible with money when they grow up, try to instil in them good money habits such as saving and paying bills on time.
For advice and tips to help you manage your money better, check out our 25 money-saving tips that could save you thousands.
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