By 3 years old, children become aware of and start to question basic money concepts, with many having set money habits by the age of seven. Let’s not forget that at such a young age, children learn and pick things up quickly, so it’s never too early to start working on financial literacy with your children to help them build useful money-based skills and confidence that could benefit them in adult life.
In this blog, we will be looking at a few different ways that could help you introduce money management to your children and allow them to familiarise themselves with some common financial terms and processes so that, should they come up when they’re older, they’ll be comfortable with understanding and approaching them correctly. The first thing to remember is that children are very perceptive and look up to the adults in their lives, so a good place to start their educational journey could be to make sure that your own financial situation matches what you’d like your child to learn. Next, be creative and playful – here are a few ideas to get you started.
Introduce them to physical money
You can give this step a try as early as nursery. At this age, your child is starting to learn the basics of numbers and counting, so why not bring coins into the mix? Having something physical to practice with can help with their learning and allow them to familiarise themselves with what money looks like. It could also be particularly useful as the world is now so heavily digital, so having physical contact with money can help them learn more directly. Don’t forget that this can be made fun for them by encouraging your child to talk about what they see and feel or perhaps draw a picture.
Play money-based games
Imaginative play is one of the most effective and enjoyable ways for children to learn. It means they can enjoy themselves without necessarily realising that they’re learning. You can start with some simple computer or mobile games that involve counting or role play like shopping. This is a great way of training your child’s basic maths skills and getting them comfortable with working with numbers and money.
Once your child gets a bit older, you could introduce money-based board games to family nights. A classic game like Monopoly is a great option. There are junior versions, which are perfect for ages 4+, and an Electronic Banking version, so you can introduce them to the concept of credit and debit cards in a fun and playful way.
Another game you can try is The Game of Life (a junior version is also available). With fun for all the family, this is an easy and fun way to get your child involved in realistic life decisions and navigate various life events between early adulthood and retirement. As each player rolls the dice and lands on different spaces, they are required to make life decisions such as getting married, having kids, getting a job, and going to university. The board offers different life paths depending on your choice, so it’s a good way of gauging your child’s decision-making abilities and how they prioritise and choose one path other another.
Pay Day is another popular game that can help get your child involved in all areas of real life, including earning a salary, paying bills, taking out a loan, and paying interest. The aim of the game is to accumulate the highest net worth by collecting money from your salary, birthdays, selling your Deal cards, running a yard sale and more. This game can help your child put realistic situations into practice and navigate financial decisions and avoid being in debt at the end of the game.
Establishing the idea of pocket money from a young age can help your child learn the importance of their own earned funds. This is a common way for many parents to bring finance into their children’s lives and get them used to remuneration and budgeting, but rather than simply giving your child money each week, rewarding them for chores and good behaviour can help them understand the value of the money they’ve earnt. They can then spend their pocket money as they wish and start to get the idea that earning requires effort and it’ll make them feel proud of having worked hard for it.
If you choose to reward your child with pocket money, this is a great opportunity to help them learn about saving up for something they really want. A piggy bank is a simple way to get started. By teaching your child to set financial targets and budget their money, they can develop an understanding of goal setting, formulating and sticking to an action plan, and feeling proud and successful once they’ve reached their goal. Tracking their progress can also play an important part when saving up as it helps your child visualise their journey and see that they’re on the right track and encouraging them to continue to save up in the future.
Open an account
Many primary schools in the UK allow pupils to open their first bank account through them. Children’s accounts tend to be less flexible than those for adults and might not offer as many perks and rewards, but it’s a great opportunity for your child to take their next step towards financial maturity and familiarise themselves with bank account management such as depositing and withdrawing money. It can also help encourage financial responsibility by having to keep an eye on their account balance and control their spending.
Another idea is a children’s prepaid debit card. This can help encourage skills like money management, spending wisely, and budgeting, which builds your child’s financial confidence. Junior accounts are for under 18s, with eligibility starting as young as 6 years old. You can also find many accounts that come with no fees and free transfers, and perks like a free custom card. Many also come with an app that parents can connect to and keep an eye on the account, with spending control options and real-time updates on where money has been spent and how much of the budget has been used.
Take them shopping
The weekly food shop is a great way to get your child involved in areas like budgeting, paying attention to how much things cost, and simple maths problems like adding and subtracting. Whether you visit a supermarket or do your shopping online, try getting them involved by asking what they’d like to buy, paying attention to the price, and understanding whether they’re going over budget. This is also a good chance to explain how deals and offers work and suggest clever ways to reduce your spending through techniques like bulk buying or discount vouchers.
Money talks with students
Children grow and mature differently, but as they become increasingly aware of various financial concepts, you can bring up more complex topics like credit cards, interest rates, and even investing when they’re in their late teens or early 20s. If they have a bank account, you could look at upgrading them to a student account, which can offer various rewards such as cashback, earning interest on your balance, or a free railcard.
You may also find this is a suitable time to address basic investing. This is a heavy subject, so going slow, steady, and gradual is important for your child to develop their understanding and confidence in this area. You could start with some of the most common investing methods like stocks and bonds, explaining how to choose a company to invest in, risk versus reward, and how to keep an eye on the market and industry news.
If you’re both ready and your child becomes comfortable with the general idea of investing, you could start getting them a little more involved. For example, let them do a bit of research and find a company they find interesting. You can then build model portfolios together and talk about concepts like asset allocation.
With so many different methods out there, they may be interested in researching this in more detail and potentially finding an investment they’d like to make in the future. Why not explore property investing? This is a great way to teach your child about different areas of the property market, which could prove useful when they’re ready to buy their first home and get their first mortgage. Once they’re on the property ladder, they may want to consider real estate investing and how to grow their money through property.
Teaching your child about finance can be a complicated process to start but doing so at an early age could really benefit their financial knowledge and confidence when it becomes a vital life skill in their adulthood. As a starter guide, you could approach this by age range instead:
· 5 and under: their first piggy bank is a simple way to start teaching your toddler about currency and physical money. It can also help them start to save, so when they receive birthday or Christmas money, try to encourage them to put it in their piggy bank. Later, you can start teaching them about budgeting.
· 6-10: Reward them with pocket money. This is a great way for your child to learn the concept of earning their own money and understand its value. This is also where the idea of saving up comes in.
· 11-16: When they start secondary school, it’s time for their first bank account. This can help them understand the value of their own money and how to manage their account. You can also use this opportunity to talk about concepts like long-term saving.
· 16+: Open new accounts like a student or savings account, or even their first credit card if you think they’re ready. When used responsibly, credit cards can help build their credit score, which will be beneficial in their adult life when they’re ready to buy their first home. By introducing them to different bank account types as they get older can also help them understand how interest rates and other realistic credit terms work so that when they leave home, they’ll know what to expect and how to navigate these elements.
Ultimately, the aim is to equip your child with financial support and confidence, and introducing them to these concepts when they’re young will make real-life situations less daunting. If they’re familiar with financial responsibility by the time they reach adulthood, they’ll be well set to make the most of their wealth and grow it in the future.
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