Top tips to teaching your child about money, from setting saving goals to getting prepaid cards

“How will she learn the value of cash if she never touches it?” This question came up at an event I spoke at last week in honour of International Women’s Day in Hove, East Sussex, at co-working space Platf9rm.

We discussed how to talk to kids about money, and a mother raised the point that her daughter has a bank card. While prepaid and debit cards for kids are trackable, easy to control and educational, she still feared her child would lose her sense of the value of money, as she never handled it.

It’s one of many questions UK parents and carers have around how to teach children about money, with 68 per cent giving them pocket money. We’re shifting towards a cashless society: the number of cash transactions fell by more than a third in 2020. So should we train kids to use new forms of payment?

Here are some insights on how to start educating your children about finance. Remember, there is no right or wrong way but it’s crucial to be brave and make it fun.

Set a good example

Financial habits are set from a very young age, so be aware of the example that you are setting. Be mindful and intentional about how you behave with money and what you say, because kids tend to listen and copy what you do. Look at messages that you are sending your children when excessive online deliveries come in, or you pick up items you don’t need at the in-store checkout.

Talk about money at home

Discuss money at home and educate from an early age. You don’t have to teach children everything they are ever going to need to know -financial literacy is something that we all build on with age and experience. But it is important to arm them with the basics as young as possible. I found the book Usborne Money for Beginners at my local library and it’s incredibly interesting. Also, if your kids like to play online and watch videos, I recommend the MyBnk website

Teach the basics

If you don’t teach your kids anything else, the main concepts of “need versus want” and delayed gratification could be the most vital lesson. It can involve setting savings goals and teaching them to achieve those targets. This encourages them to be realistic in the numbers they select and helps them learn, through experience, what is feasible and how to manage the emotions that come with money. They learn to prioritise and make money last a little longer.

Cash or card?

As more shops stopped taking cash during the pandemic, our son mostly sees us making online purchases and paying by card – and he is preoccupied with making sure any money he may receive in future is not in cash.

It could be worth ditching the piggy-bank for an online version. For prepaid cards designed for children, there’s GoHenry, Osper and HyperJar, while the apps Nimbl and RoosterMoney help boost kids’ financial knowledge.

Even doing all of the above, I still wonder how my children will handle comparing themselves with others at school. Will they feel entitled to receive money? How can I teach them about financial privilege? After reflecting on it, I’ve decided the most important thing is to make sure kids feel worthy, with or without the money. To help them as they grow up, they need to understand that the money they have or make is not a measure of self-worth.

It’s vital to help them become confident in themselves, as it will affect their future mindset. Most importantly, we must lead by example and always be open. Through these interactions with our children, we are likely also to gain unexpected insights into our own financial beliefs and behaviours.

The thorny issue of pocket money

Give pocket money if you want to, or ask the Tooth Fairy to bring a coin. My son came back from school one day asking when I would start to give him pocket money. Since I didn’t receive any as a kid, I have been trying to understand when to begin.

According to Barclays’ research, it seems to be at seven-years-old. Some parents also pay kids for chores, such as taking out the bin or clearing the table. I wouldn’t expect to do this but each family has its own financial philosophy, and it can help kids understand the value of work.

Don’t just give your children money; instead, create a plan. Help them realise that they have options with their money, including saving for something they really want. Help them set a date and see how long it will take them to reach their goal.

This can be a vital, very early lesson in budgeting. And let kids make their own mistakes. Watching them go through the experience might not be fun, but it’s a good way for them to learn.

Set an amount of pocket money that makes sense for your family. The average is £6.14 a week, the Barclays survey shows, but this varies with age.

Then, lay down clear spending rules. For instance, can they take out money at an ATM? What happens if they break the rules? What happens if their friends are getting more?