Planning & protection
Jak Antony
Starting conversations about money with children from an early age can build their financial confidence and instill essential principles they will carry with them for the rest of their lives. Despite being a crucial topic, financial education often remains neglected both at home and in schools. Shockingly, nearly half of UK adults (45%) lack confidence in managing their daily finances, according to research from the Money and Pensions Service.
This lack of confidence can make parents hesitant to discuss money with their children, as they struggle with their own financial literacy. Many parents or guardians lack a proactive plan to teach their children about managing money, yet equipping them with these skills early on is invaluable.
People who excel in managing money and building wealth typically have parents, carers, or mentors who discuss finances openly and allow them to handle spending and saving from a young age.
If you’re considering teaching children about money, reflect on your own money habits and who influenced your financial behaviours. Ask yourself:
Who did you adopt your financial behaviours from?
Before diving into age-specific advice, let’s focus on some foundational steps.
Start by considering the values you want your child to understand about money. In the initial stages would not focus on specifics of your financial situation but rather help the child understand the principles of effective resource management. Open conversations from an early age allow you to impart your values and help children form their own. Identify the pitfalls you want them to avoid, such as entitlement or lack of confidence, and carefully consider the values and principles you want to convey.
Reinforce financial concepts through practical activities. Simple budgeting exercises, setting savings goals, or discussing basic investing in a child-friendly manner can make abstract concepts more tangible. These hands-on experiences help children feel comfortable and knowledgeable about financial matters. Use stories instead of lectures and foster an open dialogue to create a strong foundation for their future financial well-being. An environment where money is openly discussed encourages children to seek advice and make informed financial decisions.
Why not introduce your little ones to money management with a simple and engaging activity? Label three jam jars: ‘Spend’, ‘Save’, and ‘Give’. Provide a regular amount of pocket money and divide it among the jars. As they grow, let them decide how to allocate their funds. Encouraging them to make spending decisions from the ‘Spend’ jar can teach them the value of money early on. Resist the urge to top it up until it’s replenished to instill a sense of responsibility.
Consider using the ‘Save’ jar for tooth fairy money or small gifts. Occasionally adding extra to their savings and matching their contributions can teach them about the benefits of saving and interest.
For the ‘Give’ jar, involve them in choosing a charity. Participating in the donation process, such as volunteering or visiting the charity, can make the experience memorable and impactful, fostering a sense of generosity.
Try involving children in shopping decisions early on. Compare branded and white-label products, show price differences, and let them choose. As they get older, give them money to allocate to specific categories, like fruit, to foster a sense of responsibility and pride in their contributions.
Help children distinguish between ‘needs’ and ‘wants’. Create a back-to-school shopping list together and discuss how to allocate the budget. This can be a powerful way to help them understand prioritisation and decision-making.
Encourage them to work for their ‘wants’ by setting goals. Have them draw or write down their ‘want’ and assign tasks to earn money towards it. Celebrate their success when they reach their goal, teaching them the value of hard work and goal-setting.
Why not give them a budget for a family event, like a birthday dinner? Allowing them to design the menu, buy ingredients, and decide on decorations and cake can be a fun way to teach budgeting and decision-making for the family.
Consider introducing your children to the banking world by visiting a bank and opening a minor or joint account. Choose a bank with an intuitive app to explore together. Helping them deposit gifts and pocket money, watching their balance grow, and reviewing monthly statements can make financial management tangible and engaging.
Organise a family stock-picking competition. Each member selects a company they know and tracks its performance. Use a stocks app to teach them how to look up share prices. Offering dividends or prizes based on performance can introduce investment concepts in a fun, accessible manner.
Assist your older child in building a budget for school or university. Teach them to anticipate income, plan for spending needs, and distinguish between fixed and discretionary costs. Transitioning to a less frequent allowance can help them practise independent budgeting. Encourage them to set aside funds for an emergency fund, building a foundation for financial independence.
Involve them in the family’s charitable giving decisions, providing insight into investments and family values without revealing the full financial picture. Including them in decisions about donations can foster a sense of responsibility and generosity.
Invite them to investment meetings or review reports to understand asset management. Encourage them to build their investment portfolio by managing a Junior ISA (JISA) at age 16 if applicable. Establish ground rules for accessing capital and income to equip them with skills for managing personal investments and fostering long-term financial competence.
Start talking about money early on and be open to your children’s questions. Honesty is key. Focus on sharing your values around money, and if you’re unsure about something, learn together. Appreciate that, like a good return, financial knowledge compounds over time. It might be tough at first, but it will get easier for everyone as you go along.
If you require further information or need assistance in initiating these important conversations, please do not hesitate to contact us. We are here to support you in fostering a financially literate and confident next generation. To discuss how we can help you, please contact us.
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THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
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