How to teach kids about money

There’s a body of evidence that cites our biases with money are ingrained in us from around age 7 and we then carry those biase into adulthood which shapes our relationship with money.

Factoring in things like our socio-economic upbringing, family relationships, friends and so on all play into this over time.

It was great to discuss this with Stephen Jardine on BBC Scotland Radio earlier today as an expert guest. It was mentioned the average pocket money in Scotland is £10.67 (much more than I got as a lad!)

One of the ways we can positively inspire the next generation, your children, grandchildren, nieces & nephews is to lean into the world of money, giving them early exposure to understand how the world works. Here’s my tips for you:

·    Be led by them - Are they showing an active intrigue in money? We started with Skye just before her 5th birthday, because she was showing an active interest in it. No hard right or wrongs here, do it when you feel they can start to grasp the simple ideas of it all. At a simple level, from 3 years you can softy begin exposing them to it day to day.

·    Give them physical pocket money - Let them start to understand what money is. You can start small, it could be £1 a week, for example. This exposes them to the tangible world of money, rather than it being this abstract concept

·    Buy them a ‘piggy bank’ - This introduces the idea of saving for tomorrow. You’ll be surprised how excited kids can get at popping their coins into their very own money bank. Out little Skye even has a little unicorn purse she carries with her to the shops (so cute!)

·    Keep to a schedule - For example, every Friday you give you child £1 to put in their piggy bank. This introduces the idea of money as something you can acquire at set periods (a bit like a wage)

·    Take them shopping with you - Let me them pick items (within reason of course) and involve them in the weekly food shop. Talk about the cost of things/ red labels and discounts/ why some deals are better than others. This starts to educate them that things like food cost money and careful choices need to be made

·    Give them a challenge - Put them in charge of part of the food shop. For example, you give them a portion of your weekly budget, say £10 and challenge them to keep within that by buying XYZ (of course you can manipulate this so they stay in budget, or perhaps let them go over it and explain what happens)

·    Let them pay with that money for their portion of the shop at the checkout (ideally face to face but automated is fine if its the only option). This helps them then understand the trade off - you give over money and you get something in return

·    Allow them to experiment with their money - As they build up their pot of money, allow them to bring some to the shops with them to buy something they want independently. You can build up to this. Perhaps they saw a pen they really liked for £2. Right, you can save up for it and we can come back when you have enough.

·    Embrace mistakes - They are going to make mistakes along the way. Spend it on things they enjoy or perhaps regret after purchase. Let them feel their way around it gently. The earlier they make their mistakes, the better for them in the long term

·    Make money an open topic at the table - We live in a capitalist world whether we like it or not. Money dictates our lives in so many ways and its incredibly sad we are not more open with money. Talk openly about bills, how much the food costs, when you need to save for things, or perhaps can’t afford certain things. This sort of casual conversation will really supercharge your little ones understanding of money and its relevance in our lives.

·    Make it fun - Give your little ones challenges to earn their pocket money. Perhaps its getting themselves dressed and making the bed/ helping with the shopping/ clearing the plates after dinner etc. This then links the reward to effort, similar to the reward we get by working. You can even make little fun sticker charts with a mix of challenges to do each week. Kids LOVE this sort of stuff!

·    Embrace digital - As they start to get a handle on it all you can introduce one of the fantastic kids money apps. Check out Go Henry/ Rooster Money, or Starling Kite to name a few, and you can gamify the process/set chores/incentives and help your little ones build up their savings.

So there you have it, there’s my top tips for leaning into the world of money with your little ones. Be gentle and understanding, do it gradually and find your own approach that works. You might even find it breaks down a few barriers for you and your family by opening up that conversation. Power on.

Keith Boyes

Chartered Financial Planner

Managing Director

Spentwell.