Teaching Your Kids About Money

Written by Karen Bryan

The mutual society Shepherds Friendly has produced the ‘Parent’s Guide to Teaching Children About Money‘ infographic.

In my opinion, it’s crucial that parents give their kids a good grounding in money management. It doesn’t appear that this is always happening, as according to Shepherd Friendly’s research only 25% of parents regularly discuss savings and the importance of money with their children. Roughly the same percentage (25%) of parents rarely, or never, discuss the topic with their kids.


Shepherds Friendly suggest an age based approach to discussing money with your children.

They recommend starting financial education from the age of three. I agree that it’s best to start young and introduce the topic in a relaxed and natural way. Parents can do this by giving their child some pocket money, perhaps in exchange for the child doing some chores. Then the child can choose how to spend their pocket money. Hopefully, the child will start to grasp the need to earn in order to have spending money, and to then make decisions on how to spend their cash.  If they would like to buy something which costs more than their weekly pocket money, they will realise that they need to save up.

Once kids are older, from around the age of 10, the importance of getting the most from their money should be emphasised. This could be researching the lowest price on something that they want to buy or the savings account paying the highest rate of interest. Parents can explain the effect of compound interest, the different types of savings and investment plans and the benefits of long-term saving. The child could have two different savings accounts, one for short-term and one for longer-term savings.

It’s also important for young people to grasp the necessity of having a budget.  One way of doing this could be to explain your household budget to them. You could even get them involved e.g. by finding the cheapest gas and energy supplier.

Parents can explain how mortgages work to older teenagers, from around the age of 17. Although, to a young person, buying a home may seem something to do in the distant future, starting to save towards a deposit for a house, will mean that they will be able to get the best mortgage deals, and will pay less interest over the lifetime of the mortgage.

It’s also useful for parents to discuss credit with older kids. If their child wanted to buy a car, the young person might take out finance to fund the purchase. So it’d be important to find the best finance deal. Parents can also highlight the danger of spending sprees if the young person has a credit card. Although parents might prefer their kids not to take out any form of credit, it can be useful to build up a good credit history, enabling access to deals such as zero interest on credit cards.

To me it’s all about getting kids to realise that money is a tool and that they need to understand how to make it work to give them the things that they want in life.