14 January 2025
general
Financial education is a core part of becoming a well-rounded adult. Yet, the Money and Pensions Service states that only 47% of children have received a meaningful financial education, either at home or school.
They note that a meaningful financial education involves receiving financial education at school, as well as regular money from parents with set rules for spending.
This may be increasingly important as children are becoming more aware of economic hardship, particularly as many households in the UK navigate the cost of living crisis.
Indeed, FTAdviser reports that most teenagers believe that saving and budgeting should be prioritised in school lessons, with 55% of young people (aged 14-17) believing they should start learning about money in primary school.
While schooling is important, financial education doesn’t have to stop at the end of the school day. In fact, money talks can be a dinner-table staple.
Discover five top money lessons to help your children learn to manage their money.
1. Teach children 3 and up about the value of money
Research from MoneyHelper shows that adults who do better with money typically had more conversations about finances as children, were given regular pocket money, and had some level of responsibility for spending and saving from an early age.
So, it can be sensible to introduce financial lessons early on, even starting from when your child is as young as three.
For young children, a great way of starting their financial education is getting them involved in practical games and activities. In fact, UNICEF states that play is a key part of knowledge and skill-building for young children. So, for children three and above, this could be the ideal time to introduce them to the concepts of saving, spending, and the value of money.
Play shop at home by labelling toys with price tags and giving your child coins to spend, or get them playing child-friendly versions of popular games such as Monopoly. You could even help them allocate their pocket money for different purchases or fun activities.
This could also be an excellent opportunity to discuss the finer details of budgeting and saving, helping them to understand the difference between “needs” and “wants.”
2. Show pre-teens what it means to budget
As your children get a bit older and develop a greater understanding of money (and a longer attention span!), this could be a good opportunity to talk to them about financial issues that could affect them now and in future. For example, you could introduce concepts including:
Consider providing tailored learning resources, whether through age-appropriate books on financial literacy, or board games such as Pay Day, The Game of Life, and even Settlers of Catan. You could also allow them to oversee the money you would spend on a day out.
Help your children work out their goals for their money, and support them in putting together a budget. Celebrate their successes, and if they want to put more into their savings, give them opportunities to do extra chores around the house to earn more.
3. Help teenagers understand spending, saving, and rainy day funds
Once your children have a handle on budgeting, giving your teenagers the opportunity to manage their own money could help them understand that it is not an unlimited resource.
If your teenagers find themselves out of money sooner than they’d expected, start a conversation around their choices and help them come up with potential solutions. Crucially, it can be useful to resist the urge to give them more money, and instead get them to consider how they can avoid the situation next time.
Encourage them to think about what they could have done differently and brainstorm ideas to avoid it happening again, such as tracking their spending and building a more robust budget.
Consider talking to them about the value of savings and rainy day funds, and how having some money tucked away can help you feel more secure and in control.
It may also help to stress that this money isn’t meant to be used to cover spending shortfalls, but rather for emergencies and big expenses.
4. Show teenagers the difference between “good” and “bad” debt
As well as explaining spending, saving, and budgeting, it can be helpful for teenagers to understand debt, and how it can be good or bad.
Explain to your teenagers that good debt is money you borrow to achieve meaningful growth in your personal life or finances. This could be for a student loan, a mortgage, or even business loans.
Then, help them understand what bad debt looks like and the financial repercussions of this, such as high interest rates, the snowball effect of compound interest, and the impact on their credit scores. Examples of bad debt you could discuss include:
Part of this conversation could include discussing how to build their credit scores, and why, in some cases, accumulating a small amount of debt can help them build their credit history, as long as they’re paying it back efficiently.
5. Teach young adult children about the value of investments and pensions
Whether your young adult children are becoming students, or starting their careers, having conversations about the future can help your child develop a mindset of saving and investing for the long term.
Talk to them about compound returns and what saving money now could mean for them in 20 or 30 years. Remember, even small amounts now could add up significantly for the future. You could even share the results of your own investments to help give them an idea of what they could achieve.
Furthermore, explain how their pensions could accumulate over time, and the value in regular contributions. This could also be a great opportunity to discuss what their first pay cheques might look like. For example, they may not be aware that their workplace will likely auto-enrol them in a pension scheme. While it will likely lower their monthly salaries, it will help them be better prepared for the future.
Although your children may still encounter financial difficulties, the lessons you’ve put in place could help them navigate the intricacies of managing their money independently, and remaining in control of their monthly expenses for their entire lives.
Financial education matters for everyone
Perhaps most of all, the key to teaching your children about money is fostering an open and constructive environment to discuss finances.
You could start teaching all the above lessons to your children at any age. There are plenty of ways to take even the most complex ideas and break them down into age-appropriate conversations or activities.
Crucially, being transparent with your children about your own money could help them better manage financial stress later down the line. Support your children to build their confidence and maintain a positive relationship with money by setting them up for success from an early age.
Get in touch
Imparting financial wisdom to your children is important, but there are other ways you can support their financial future.
We can help you build a financial plan that aids your children and grandchildren, and you’ll know that with the lessons you’ve imparted, they’re more likely to make the most of the money you leave them.
Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
