How to teach your kids about finances

During covid lockdowns, most parents found themselves suddenly, and unhappily, picking up the mantle of teacher to their kids. It was an experience that tested the mettle – and I for one was more than happy to hand back that particular responsibility as soon as my teenage girls were allowed to return to the classroom.

But there’s one subject that isn’t universally taught, despite its huge importance in our lives: personal finance. When it comes to money, parents are expected to provide all the lessons their kids will need. So where are we meant to begin?

As part of our Money Matters podcast series, I caught up with celebrity maths teacher and personal finance guru Bobby Seagull. He has noticed a ‘strange cultural phenomenon – we are comfortable discussing the inner details of our relationships, yet when it comes to money people just shy away from it. It’s almost something that society expects you to understand, but actually you are never taught about it.’

And he thinks the best way to help kids is start young and just get talking: ‘You can have money conversations with children at an early stage…make it part of their everyday conversation… [so] when they become adults it’s not a taboo subject.’ It’s solid advice, and something I did with my own kids. I found it wasn’t as hard as you might think (though I freely admit, the teenage years have brought new challenges).

Here are the other things I’ve learnt after 15 years of trying to teach my children about money:

Bring money into everyday tasks and even play

There are opportunities to bring money into just about everything. When they were younger, my girls used to love sitting in the supermarket trolley while I did the weekly shop. I’d give both of them a pound coin and they could pick whatever they wanted from the huge displays of brightly coloured and unusual produce. If something cost more than a pound, we’d talk about where they might get the extra money from. Did they have any change left over from the week before, was their sister spending less than her £1, and might she be willing to hand the extra over for a slice of whatever was in the basket? Just getting comfortable with the notion of money, with what each coin was worth, was a really good first step.

Toymakers know that children learn through play, and there are plenty of games and toys that have money as part of their package. But you don’t have to buy anything specific or try anything complicated. Simply asking, ‘does teddy have enough to pay for that?’ while playing ‘shop’ with your kids is enough to get them thinking about the value of something and how money factors into everyday life.

And don’t be scared about talking to them about your own financial decisions. You might really want that all-inclusive break to the Algarve this year, but a week in a caravan in North Yorkshire will be just as much fun and will leave some money left over to pay for those pretty new shoes.

There’s no magic money tree

Pocket money might seem an obvious option when teaching kids about finances. But that first brush with a ‘wage’ is really important: earning money, spending it on things you want, saving up for things you really want, and getting a basic idea of the value of things. It’s very easy as a parent to just pay for things, but that suggests the magic money tree is evergreen – when every parent knows there are some days when its branches are looking decidedly bare.

But rather than just dishing out some cash each week, take time to discuss what your kids want to do with the money as you’re handing it over. Instant gratification is tempting but a packet of sweets is quickly gone, whereas a new game will give hours of pleasure. Make the goal straightforward and attainable in the first instance, and try using something visual like a chart or a jar when your kids are young, and graduate to online bank accounts when they get older. For my two I try and give them a mix of cash and money transferred straight to their accounts, so they have to really think about how much money they have and where it is.

Get tech smart

You need to look around for the bank account that best fits what your child needs, but certainly by the time my girls were 12 they were ready to take on a bit more responsibility. They’re ridiculously tech savvy and use their banking aps to keep an eye on what they have in their accounts and what they have to spend when they’re out shopping with their friends (which has become pretty much every weekend).

Even young kids can navigate their way around a smartphone, so you need to make sure they’re aware of how to stay safe online. My two regularly receive those scam text messages, but they know how to forward them to 7726, and delete and block the sender. We talk about virus protection and identity theft, and keep a close eye on exactly how much they share of their personal profiles on their social media pages.

Introduce jargon

Interest, tax, pension, credit, debit, budget – there are lots of little words that are really scary if you come across them for the first time as a young adult. But you don’t need to work in financial services to help teach your kids the basics.

Take interest, for example. I often find myself without any hard cash when I need to pay the window cleaner or buy fish and chips from the shop down the road. Usually I’ll raid the kids’ cash jars – but the money I borrow I always return with interest. Of course, if the Bank of England set rates as high as the one I pay, there would be a riot, but it gives my kids a rough idea of how lending and borrowing works.

I also share my weekly budgeting with the girls (when I can get them off their phones). I’ll talk to them about how much my husband and I get paid every month, show them what goes out and explain what’s left. I’ve shown them my wage slip and discussed why quite a lot of what I earn never makes it into my bank account. But I also encourage them to ask questions – they don’t always like the answers, but they know they can always ask.

No clue, no worries

The last section might have been the point where, as a parent, you start to get slightly nervous about the limits of your own knowledge of finances. But actually sharing the fact that you don’t know something is really important. Nobody knows everything, and personal finance definitely has the ability to bamboozle. The trick here is to teach your kids that it’s okay not to know something, and it’s okay to ask questions. There is so much information available now, so just fire up your search engine and look for answers together.

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