How to teach kids about money

One of our primary jobs as parents and carers is to prepare our kids for the realities of life. We give them love and encouragement and teach them how to behave with others. But we should also be teaching them about the one thing that makes the world go around: money.

Don’t worry – you don’t need to be a financial guru to start talking to your children about cash. Though the history and implications of money can feel complex, the basics are what matter: what it is, how it’s used and some of the reasons it’s important. Let’s explore some simple ways you can start getting your kids up to speed with pound sterling.

Show and tell

First things first, we need to show our kids what money actually looks like. Many adults can go days, weeks or even months without handling actual cash due to contactless payments and credit and debit cards. But this is how we make money seem intangible, easy to spend and essentially invisible.

Consider giving your kids regular pocket money (a nominal amount will suffice) to get them used to the idea of having money. You could also withdraw some cash rather than defaulting to your cards, so they can see you spending it. Showing kids each note and coin, and explaining what they represent, is a solid place to start their financial education.

Context is key

OK, now they know that the bright blue notes are worth £5. But what does that mean out in the real world? The next lesson could demonstrate how much things in the world cost. A great way to illustrate this is to point out things around the home – an apple, a book, the TV or their favourite toy – and tell them how much they might cost.

To help them really put it into context, you could do some simple maths and work out how long it’d take them to save up for each item with their weekly pocket money.

The goal here isn’t to scare them, but to contextualise how far a bit of money can take them. And for expensive items, it can assure them that pricey things can still be within their reach over time, even if they don’t have enough money right at that moment.

Make their money work for them

An important lesson to pass on about money is the value of interest and how money can grow over time. Some good ways to demonstrate this include giving kids a small monetary reward for certain achievements, like hitting a savings goal or going above and beyond in their chores.

This can not only demonstrate the concept of what it's like to earn interest – earning money on your money – but can boost the likelihood of those actions being repeated, thanks to positive reinforcement.

It comes and goes

One of the lessons many of us adults forget is that it’s OK to spend our hard-earned money. In fact, it can be argued that the point of working hard and earning our cash is so we can spend it on the things that matter to us.

So, while teaching kids the value of savings, it’s also important to show them it’s OK to spend responsibly too.

The key is that spending should always be mindful. Whether it’s sitting down together and picking the item they’ll buy once they hit an amount in savings or making a day out of buying one or two special things, it’s a sound idea to demonstrate that money comes and goes – and there’s always the possibility of replacing what’s been spent.

A mindset of abundance – the belief that there is enough wealth, happiness and success in the world for everyone – can be incredibly difficult to cultivate in adulthood, so the earlier we start enforcing it, the better. Of course, not everyone has the same measure of wealth, happiness or success, but that's a good lesson to discuss with your kids too.

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Recommended reading

• Help! Do kids really cost this much to raise?
• How to teach kids about money in a cashless world
• Support for financial skills