How to teach your children good financial management skills

Written by Frank Wampamba, Financial Adviser

With almost three-quarters of Britons struggling with basic financial literacy, we often come across clients who don’t know much about managing their money.

While a financial adviser can help you overcome difficulties, everyone would benefit from some good financial education, starting from a young age.

By teaching your children the basics about money, you’ll put them in a great position once they start earning and developing financial commitments.

There’s certainly no ‘set age’ to start talking to your children about money, as every child is different in terms of development and maturity. However, as finance professionals, we’d recommend the earlier the better!

Schools don’t teach your children the value of money

Unfortunately, we tend to find that schools do not cover much at all when it comes to managing finances. Most institutions don’t teach important topics such as bank accounts, taxes, bills and mortgages, and if they do, it tends to be in very little detail. This often leads to many teenagers not actually knowing how their parents manage and maintain their family home, and the associated costs of becoming a financially independent adult.

By talking openly about money with your children from a young age, they will learn to be more responsible – learning to plan how to use it, and why it is so important to know its value. It’s also vital for them to understand how it can be difficult to obtain money, and therefore to spend it wisely, using it on things that are important – the ‘needs’ first, rather than the ‘wants’.

It doesn’t have to be complicated

A great way to teach your children more about money is to use life events such as their birthday or Christmas time – as many children don’t know what it actually involves and the sacrifices made for them to receive their presents.

If your child receives a monetary gift for their birthday, why not encourage them to set up a junior bank account to deposit their money into and save up? This then provides a great opportunity to simply explain what banks are and how they work, whilst making it an exciting experience. By turning it into a fun trip out to set up an account, your child is more likely to be engaged and learn.

There are many choices when it comes to junior savings accounts, which all allow you to have different levels of control over your child’s spending – allowing you to relax or take control, as needed. Our list below includes some great articles, reviewing the top junior bank accounts currently on the market.

Not sure where to start? Here are some ideas

It can be difficult to know how to begin when it comes to learning about money, as there are a lot of different aspects to becoming a financially responsible individual. We’d recommend starting as simple as you can, and then as your child gets older and more mature, you can chat about more complex topics.

Here’s a list of ideas to help you:

Where money comes from, and how it is earned

The importance of saving money and earning interest

Using pocket money as a way to teach saving

Allow your children to ‘earn’ – give them chores with monetary rewards

Allow them to make decisions about spending their money, and learn from them (maybe those expensive trainers weren’t worth it after all…)

Write a list of costs and ask them to categorise into ‘needs’ and ‘wants’

Using electronic money, by setting up a monitored bank account

Teaching them about debt and credit cards

Do budgeting exercises. For example, go to the supermarket and give them a budget to spend on dinner!

Explain more about how to buy a house, and how a mortgage works

What tax is, and why we have to pay it

Encourage part-time jobs when they reach the required age

Use the 50/30/20 rule for money – 50% to be spent on needs, 30% on wants and 20% to be saved

Online resources are a great tool to help

Here are some great online resources that can help you and your child to learn:

12 way to teach your children about money, Barclays

Teaching kids about money, The Times

Best junior stocks & shares ISAs, The Times

Top children’s savings accounts, Money Saving Expert

Best children’s bank accounts 2023, Which?

Online resources are fantastic, and a great place to start – however, we’d also recommend getting in touch with our knowledgeable team of advisers for some additional, more personalised advice.

Contact us today to find out more about how we can help you and your family.