FINANCIAL experts have shared how to teach young kids about money – from charging them ‘rent’ to encouraging them to sell their old toys.
Children start forming their attitudes towards money at a young age, making the lessons they learn at home potentially important for how they save and spend later in life.
For parents, teaching young children about money does not need to mean sitting them down for complicated lessons about interest rates, mortgages or pensions.
Financial experts and business owners say some of the most effective lessons can come from pocket money, household chores, handling physical cash and simply allowing children to make their own spending decisions.
Giving children control over a limited amount of money, and importantly not bailing them out when they spend it all, can provide a valuable early lesson in budgeting.
But experts say the behaviour of the parents could ultimately provide the most important financial education of all. Children notice how adults spend, save and talk about money, meaning lessons about budgeting are unlikely to have the desired effect if parents are constantly impulse-buying themselves.
Rather than making money frightening or refusing to discuss it, parents are being encouraged to involve children in age-appropriate conversations about choices, such as explaining that spending money on one thing can mean having to wait for something else.
Rent
Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, shared his method of teaching his kids about money.
He added: “I charged my 12 and 8-year-old rent. We ‘charged’ them £5 a week and then put up a jobs list in the kitchen. Small tasks and gave them all a value: make your bed for £1, feed the tortoise for £1, empty the dishwasher for £2 etc. Monday to Friday the kids could make enough to cover their rent and in fact earn a few quid on top.
“My savvy eight-year-old was asking for extra jobs. In a few weeks, they learned a little about the value of money. The nagging for us to buy them tat decreased and they have been less wasteful since.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said it is important to talk about trade-offs.
He added: “When my daughter was 5, we pinned a chore list to the fridge with a £1 tariff for each task – brushing her teeth and hair, making her bed, emptying her wastepaper bin, taking cups and bottles back to the kitchen, helping walk the dog, and so on. Around age 10, we started taking her into town on Saturday mornings for a bit of shopping and lunch, paying for everything on a credit card.
“The next visit, I’d go straight to a cash machine, withdraw £50 (later £100 as she got older), and tell her: when this money’s gone, it’s gone. Funnily enough, she was much more careful buying with cash rather than card.
“We’ve always talked openly about trade-offs – if you spend it on X, you can’t spend it on Y. The old adage holds true: people do what you do, not what you say. So, make sure what you’re teaching your child matches your own spending and money habits.”
Helen Llewellyn, Founder at Elemental Tribe, said she had to undo lessons from childhood.
She added: “Wouldn’t it be great if kids learned that money is a tool and not a concern or the only recipe for success. I don’t have kids but remember vividly my childhood money lessons. Do chores, get pocket money which can be spent on sweets at the market. Only 3 sweets per day.
“That plus money is earned through hard work which might mean keeping you away from fun things. This lesson has needed plenty of undoing in my adult life. If kids were taught about money the world would be a better place.”
Cash
Ben Foster, CEO at Sheffield-based The SEO Works, said money for chores is a strong lesson.
He added: “It’s easier to teach kids about money when you use the physical stuff – they can see it depleting before their very eyes. Our kids still have a physical money box and spend from it. Over the holidays they have earned a weekly income for doing chores in the house. All of their birthday money is generally in cash too.
“They like to count their money so they know when they are running low. They then know they need to save up if there is something they are after. Now our eldest is 13, she also has a debit card, but hopefully the lessons she has learned so far put her in good fettle for the digital money world.”
Tony Sanchez, Founder at Bridging Loan Directory, said parents should talk openly about prices.
He added: “As a father of three now adult sons, I think children learn more when money is made practical rather than treated as an abstract lesson. Pocket money gives them a finite amount to manage: spend it immediately, save towards something larger or discover that once it has gone, it has gone.
“I would not pay for every household task because children should also learn that contributing to family life is not always a transaction. Additional jobs can earn extra money and connect effort with reward. Parents should talk openly and appropriately about prices, household choices and why one purchase may mean postponing another. They should avoid making money either a taboo subject or a constant source of fear.
“Children notice how adults behave, so repeatedly buying impulsively while telling them to save is unlikely to teach the intended lesson. The aim is not to make a seven-year-old understand finance. It is to establish that money involves choices, limits and consequences.”
Michelle Lawson, Director at Fareham-based Lawson Financial, said saving should be encouraged.
She added: “Kids can be taught at a young age not only about money but also about maths. The dangers of a cashless society takes this element away from kids learning what they can get with their coins or notes and how to work out the change.
“Many are good at bartering for pocket money via chores but the importance of finance and how it works should not be ignored. Saving should be encouraged and open conversations had about when times were tough and how you coped as adults. Learning about money can start at a very early age and sets the foundations.”
Learning
Matt Coulson, Founder at Rickmansworth-based Heron Financial Ltd, said selling old toys is a good lesson.
He added: “With my four-year-old, we’ve started something simple that’s worked better than I expected. He picks out old toys and games he’s done with, we list them on Facebook Marketplace for him, and when a buyer comes to collect, we go to the door together and he takes the money himself.
“Then he chooses something new to spend it on. He does the deciding and the collecting; we just handle the admin. What I like is that it makes money real. He can see the whole chain: letting go of something he’s outgrown, a stranger turning up to buy it, and the cash in his hand that becomes a new toy.
“That’s a genuine lesson in value and trade-offs, and at his age it lands far better than pocket money in a jar or an abstract chat about saving. He’s four, so we’re not exactly running a hedge fund. But he’s starting to grasp that money is earned and swapped for things rather than just appearing, and if the habits really do form by seven, the earlier that clicks the better.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said children watch their parents’ relationship with money.
She added: “Children learn money long before they understand a mortgage or a pension. They watch whether we panic at the till, constantly say ‘we can’t afford it’, impulse-buy, save, compare prices and wait for things. That behaviour becomes their first financial education.
“I like pocket money, but not as a salary for every basic chore. Give children a small amount they control and let them make mistakes with it. If they blow £10 on something ridiculous on Monday, do not rescue them on Tuesday. That lesson is worth more than a lecture about budgeting.
“The biggest mistake parents make is either hiding money completely or making it frightening. Children do not need adult financial stress dumped on them, but they should hear healthy conversations about choices: “We could buy this, but we’re choosing to save for that.” Money confidence starts with understanding that money means choices, not fear.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said the value of money needs to be taught.
He added: “My two children are very different when it comes to money. One is a saver, the other more of a spender. The best thing I did with the spender, when he was very young, and would be wanting small toys from the shop was to offer the opportunity to buy it himself with either holiday or birthday money he had from grandparents rather than myself buying them for him.
“This instantly shut down his wish for that cheap toy. He was much happier to spend my money rather than his own.”
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said money needs to become a normal topic of family conversation.
He added: “I believe money conversations should start early and feel natural rather than intimidating. Everyday activities, such as adding up a shopping basket or estimating a restaurant bill, can help children build confidence with numbers and decision-making.
“As they get older, involving them in discussions about their Junior ISA and potential investments can deepen their understanding of saving and investing. Pocket money is also a useful learning tool. Children can contribute towards items they want by earning money through chores or responsibilities.
“My own children, now over 18, have ISAs and credit-building cards, and understand the importance of paying balances in full each month. The key is to make money a normal topic of family conversation rather than something avoided.”
