Teaching children about money

From their first steps, your children are developing important life skills. We can help you build your confidence, so you can teach your children about money.

 

Before we start

Anna Mathur, Psychotherapist, Writer, and Speaker, shares five ways on how to help your children develop a positive relationship with money.

By equipping your children with the skills now, it will help them to make smart financial decisions for the rest of their lives.

  • Helping children aged five to six understand how money works

    As children get older, they start to understand more about how to use money. We have three lessons for five to six year olds, with practical tips on what you can do to help build their understanding.

    1. Keeping track of money

    As children learn how to read, write, and count, they can start making simple financial records.

    If they have their own money, get them to write down what they spend. If they do not have their own money, get them to do this with you for your weekly shopping. Make a budget and see what you spend against it.

    By keeping track of their money, they can look back at what they have achieved and feel proud of the saving and spending.

    Learning together - Tracking a savings goal

    Work out a savings goal with your child for something they may want. Think about what it costs and make a chart with them. Break down the total into small amounts to tick off as they save. 

     

     


     

    2. Wants and needs

    Recognising the difference between wants and needs can help children understand tough spending choices.

    • ‘Wants’ are the nice-to-have things they can live without.
    • ‘Needs’ are the essentials to survive, such as food, water, and a home.
    • Paying bills may not seem as exciting as buying treats and ice cream. But children of this age can start to understand priorities. 

    Learning together - Everyday wants vs needs

    Talk about ‘wants’ and ‘needs’ when writing a shopping list for the supermarket. Point out the essential and the nice-to-have items on the list. You could work through this together and chat about whether the items are a ‘want’ or a ‘need’.

     

     

     

     

    3. Saving money

    Children of this age may be able to recognise that by not spending on small things, they can save their money for something bigger. Encouraging a savings habit now will help them in later life.

     


     

    Learning together - Make it fun

    Label three different containers for spending, saving, and giving. This will show how you use money for different things. If your child gets pocket money, birthday, or Christmas money or if they earn cash for doing jobs around the house, help them divide it up. Empty jam jars are great to use because children can see the coins building up. 

    Make it more real by talking about how they want to use the money. What would they like to buy now? What would they like to save up for?

       
     

    The early years lesson

    • Once the money is spent, it’s gone, and can’t be spent on something else.
    • ‘Wants’ are the nice-to-have things they could live without, while ‘needs’ are essential to survive, such as food, water and a home.

  • Helping children aged seven to eight understand spending and saving

    At this age, children want to make more of their own decisions about saving and spending. 

    To help them understand how money works, we have some lessons and practical tips on how to build their knowledge.

    1. Ways to pay

    Cash is often easier for children to understand. But at ages seven to eight, it’s good for them to understand there are other ways you can pay for things. Such as debit cards and credit cards.

     

     

     


     

     

    Learning together - Different ways to pay

    Start a conversation about the different ways to pay by showing the cards in your purse or wallet. Point out the different cards and when you might use them. Explain the differences between each card. 

    • Debit cards – takes money out of your bank account.
    • Credit cards – you ‘borrow’ the money, which is paid back every month. This may cost you more in the end. 
    • Loyalty cards – you can earn points on spending. You can then use these points to pay for things with that store.
    • Direct Debits and standing orders – these are payments set up to pay for regular bills and subscriptions.

    2. Earning money

    An important life lesson is to understand that you need to earn money, you don’t get it for free. And how different jobs pay different amounts. This may also help them think about the type of job they might want to do in the future.

    Learning together - Cash for chores

    To help children learn about earning, offer to give money for jobs that they do around the house. It could be anything from unloading the dishwasher to sweeping up leaves in the garden. Where some chores can earn more than others.

    3. Lending and borrowing

    At this age, children can usually grasp that you can borrow money if you don’t have enough. Here are some important lessons for them to understand: 

    Borrowing isn’t free money. It needs to be paid back. As an adult, if you borrow money, it is likely to cost more. This is because you need to pay it back with interest charged.

    Borrowing can cause money worries. It’s important to pay back the money borrowed by the terms agreed or you may incur fees and charges. 

    Learning together - Bank of Mum and Dad

    If your child doesn’t have enough money to buy something they want, you could lend them the money. Agreeing how and when they’ll pay you back. Suggest that they do some jobs around the house to earn some money to repay you, and charge interest on top if it’s not re-paid as agreed. They may decide that saving is more appealing than having terms to repay any borrowing.

     

     

  • Helping children aged nine to ten learn the value of money

    As children grow-up, they’ll start picking up on popular trends including advertising designed to encourage spending. It’s important to help children understand the value of money and making the right choice when buying something.

    1. Spending money

    Being able to find a good deal is a great life skill. Help your children to understand that:

    • Similar things can cost different amounts.
    • Comparing prices across different stores may save you money.
    • It might be better to save up for a higher-quality item, it may last longer.

    Learning together - Making the most of their money

    If your child is asking for something, like a game, or new trainers, ask them how they’ll pay for it. Get them to look for the best deal and think about whether they could get the same item for less.

    For example, buying it second-hand, or selecting a cheaper option. They should consider the quality of the item when looking at these options. Asking themselves if the thing they want to buy is worth the money.

     

    2. Saving and spending

    By age nine to ten, children understand that advertising encourages people to spend. Help your child to see the things that can influence spending. Look at adverts together and talk about what would make you want to buy the product. 

    Talk about whether spending their money now, or saving it for something better or more useful, would be a smarter idea.

    Learning together - Look at the ads

    If you’re watching TV together and an advert comes on, talk about whether it’s making them want to buy what you’re seeing. Maybe it’s a food advert making them feel hungry or an ad for the latest new phone.

    Explain that adverts are designed to encourage you to spend money. Ask your child to think about whether they do really want the thing or whether it’s better to save for something else. This will drive better spending and saving habits.

    3. Interest on saving and borrowing

    Interest can be a reward for saving but also a cost when borrowing money. By helping children to understand interest, you can encourage them to save and earn interest. It may also help them avoid extra charges if they need to borrow money in the future.

     

     

     

     

    Learning together - Understanding Interest

    Use an online interest calculator, to work through an example of how interest mounts up over time. For example, if you save £100 with a bank that pays 5% interest in a year, you will earn £5 in interest. 

    Help them to understand that they can also earn interest on the interest. So, if you had £100, at 5% interest, you would have £105 at the end of year 1. If you keep the £105 in the same account, with the same interest rate of 5%, after year 2 you’ll have a total of £110.25.

    Helping children to understand the benefits of saving money means they are more likely to become more financially confident. Hopefully then having fewer debts in future life.

  • Helping older children aged 11 to 13 prepare for their future

    Starting secondary school is a big step for children. They’ll experience new freedoms and pressures and will likely become more interested in money. Here are some key lessons to support you and your child.

     

    Developing good money habits for 11-13 year olds

    Sameera Parpia - Mum to Aisha and Lloyds Bank colleague shares ways you can help 11–13-year-olds develop good money habits.

    1. Working and earning

    Planning ahead can inspire young people to think about where their money comes from now, and where it may come from in the future. 

    • Prepare for part time work – maybe they could earn money for jobs around the house. Your children could wash the car, mow the lawn or walk the dog.
    • Talk about their financial future – what do they want to do when they leave school? Do they want to go on to higher education or start earning straight away?    
    • Chat about how digital tools can help them stay in control of their money. Our banking app can give you spending insights to find out where your money goes, spot spending patterns, and see where you can save money.

    Learning together - Funding their future

    It’s good to talk about different jobs and how much they pay. Ask your child what they might want to do in later life.

    They’ll need to select their options at school and considering what job they may want in the future can help with this. Also, understanding rates of pay may influence the decisions they make.

     

     

     

     

     

    2. Debt and borrowing

    The reality of borrowing and managing debt could help children better manage their money in the future. Help them understand: 

    • Why borrowing might be necessary in the future, and if there are any consequences to borrowing.
    • Borrowing comes at a cost. They’ll need to consider whether they can afford it. 
    • The different types of borrowing, like a loan, mortgage, credit card or overdraft.

    Learning together - Bank of Mum and Dad

    If your child asks for money, consider suggesting ways for them to get it:

    • Can they do jobs around the house to earn it?
    • Do they have savings they could use, or can they continue saving to afford it?
    • Could they borrow the money? You could give them terms for paying it back. 

    Thinking about where the money is coming from can help them understand the differences between ‘wants’ and ‘needs’. Suddenly that item might not seem so essential after all.

     

     

    3. Financial products and how they work

    Between 11 and 13, children start to learn more about financial products. You can help them by talking about: 

    The benefits and risks of products like insurance or loans. 

    • How they can pick products that meet their needs.
    • What available, for example, current or savings accounts, mortgages, car insurance or even mobile phone contracts. Learning about these financial products helps with an overall understanding of finance.
    • What they’d like to do with their money. It can help with working out a budget and creating sound financial decisions.

     

    Learning together - Open an account

    From the age of 11, a parent or guardian can open a bank account for a child. Have a look at the different bank account options with your child.

    • Will they earn any interest on their money?
    • Will they get a debit card?
    • Are there any charges?
    • Is there an app?
    • Do their friends have an account?

    That way, they can learn first-hand that all accounts aren’t the same.

    Learn more about selecting a bank account for your child.

  • Help 14 to 16-year olds on the road to financial independence

    Between the ages of 14 and 16, young people are keen to become more independent. Help prepare them by getting them to manage their own money.

     

    Helping 14-16 year olds towards financial independence

    Andy Maddren - Dad to William and Lloyds Bank colleague shares ways you can help 14–16-year-olds towards financial independence.

    1. Planning and budgeting

    Help to plan and track spending and savings. It’s a skill that will take them into their adult years and help manage any unexpected costs.

    Having responsibility for their own expenses is a great way to learn. It helps them to learn the value of money.

     

     

     

     

    Learning together - Balance their own budget

    Here are some ideas how you can put money lessons into practice and give your teenager a chance to budget:

    • Set a spending limit for a day out, or an allowance for bus fares, school lunches or socialising.
    • Help them work out what they can afford to spend and how to stick to a budget.
    • Talk about how you manage your own money, making sure you have enough to cover essential bills. It’s a great way to help build financial confidence.

    See our Smart Start hub for useful information on spending and saving.

    2. Avoid fraud and identity theft

    It can be easy to be a target for fraudsters. Help your child to spot fake websites, online shopping scams and social media scams.

    Reinforce the use of strong passwords to help them stay safe. Make sure they keep their personal and banking details private.

     

     

     

     

    Learning together - Protect yourself from fraud

    • Fraudsters often target the young and vulnerable. Help them spot and protect themselves from fraud.
    • Point out the types of scams to watch out for.
    • Help them find out where they can see the latest scams in action.
    • You can also find out more about how to spot and avoid scams here.

    There are useful guides on GetSafeOnline.org and the Citizens Advice Scams Action Service. Make sure they know to report fraud as soon as they see something they don’t recognise.

    3. Work and taxes

    Teenagers can work part time from the age of 13. There are rules about when they can work and what they can to do. You can find more information on this on the government website.

    Once they have a job, it could help to talk them through their payslip, such as:

    • Income tax and how much they can earn before they incur tax deductions.
    • The difference between ‘gross’ pay (total amount earnt) and ‘net’ pay (what’s left after income tax and National Insurance contributions are taken).
    • Welfare benefits that may be payable to people who can’t or may not be able to work. If for example, they are unwell, unemployed or looking for a job.

    Encourage your teenager to budget their money. Suggest putting 50% to essentials, 30% to savings, and enjoy the final 20%.

    Learning together - Talk through a payslip

    You can find example payslips online. Talk through the details including salary, deductions and ‘take home’ pay. It will help your teenager to understand their own payslip when they start earning.

    • Point out the total pay they’ll receive. Show them the deductions (money taken off for income tax and National Insurance contributions), and how much is left afterwards.
    • Deductions for things like pension contributions can start conversations about saving for retirement, even if it does seem a long way off.
    • Point out useful information such as the payroll number, National Insurance number and tax code.


     

       
     

    The older children lesson

    • Set yourself a weekly budget and keep track of your money.
    • Protect yourself from fraud - keep your personal and banking details private.
    • Stay up to date on the latest fraud scams - get in touch straight away if you think you’ve been scammed.

  • Helping young adults as they start to earn money

    As a young adult, having confidence with money is an essential life skill. It’s important to understand payslips, know what student loans are available, or whether they are entitled to any government benefits.

    Helping your young adult to budget, especially if they are moving away from home for the first time, will really help them to build good financial habits. Our budget calculator can help you with this.

    If they are looking for finance, may be to buy a car or to rent accommodation, it could be difficult if they don’t have any credit history. If you are asked to act as a guarantor, it’s important that you understand what the legal and financial implications are.

    Working and earning

    If children ask for extra money, consider suggesting different ways to earn some money.

    • Earn money by doing jobs around the house.
    • Use some of their savings or wait until they have saved up.
    • See if they want to sell something that they no longer need.
    • They can borrow the money - with the understanding they’ll need to pay it back.

    Weighing up the options can help children understand the differences between 'wants' and 'needs'. They may decide that the item they want might not seem so essential after all. 

    Work and taxes

    From the age of 13 teenagers can get part-time jobs such as delivering newspapers, waitressing or stacking shelves.

    At 16, teenagers are given a National Insurance number and may start getting a payslip. Help them understand it by talking them through it. 

    • Deductions -  the amount taken to cover National Insurance and Income Tax.
    • National Insurance number - this makes sure that wages are taxed correctly.
    • ‘Gross’ pay – the amount earned before any deductions are taken.
    • ‘Net’ pay – the amount remaining to spend.

    Also help them understand benefits. For people who can’t work, due to being unwell or unemployed, they may be able to claim state benefits.

    Debt and borrowing

    Understanding borrowing and debt, can help make sensible money management decisions.

    • Borrowing options – understand the differences between loans, overdrafts, and credit cards.
    • Borrowing comes at a cost – interest is paid on the amount borrowed until it is paid back.
    • Planned borrowing – borrowing over an extended period, for a specific reason. For example, student loans or mortgages
    • Overdraft – an amount borrowed from your bank account that exceeds the amount you have.

    It is important to make sure that you understand the cost of borrowing and can pay the amounts back in the time set by the lender.

    Avoid fraud and identity theft

    Fraudsters often target the young and vulnerable. Help children spot and protect themselves from scams.

    • Use strong passwords – never share passwords.
    • Keep personal information private – never share bank details.
    • Never share personal details to people who you do not know.
    • Find out more about how to spot and avoid scams.

    You can also learn more, or report financial fraud, at GetSafeOnline and the Citizens Advice Scams Action Service.

     


     

    Young adults lesson

    • Keep your National Insurance number safe and make sure you understand your payslip.
    • If you are looking to borrow money, make sure you understand any interest or charges that may apply.
    • Keep your personal and bank information safe and be aware of scams and fraud.

Helping children aged three to four understand how money works

Learning about money at an early age helps build good financial habits for later in life. Giving your children the money to hand over in a shop will help make them aware of how to spend money.

Here are three lessons for three to four year-olds, with tips on what you can do to help build their understanding.

 

Nurturing financial confidence

A view from Anna Mathur, mum, psychotherapist, writer and speaker.

Anna, shares ways you can nurture your children’s financial confidence, alongside the uncertainties of modern-day life.

1. The value of cash

In a world of contactless spending, it is still as important as ever for children to learn about cash. At this age they may:

  • start to spot the differences between coins and notes and learn their values.
  • see how pennies add up to pounds.
  • understand that money is worth something and you need to keep it safe.

Learning together - Coin spotting

Have fun by giving your child coins to play with. Show them the shapes, sizes, and colours.

Talk about the different values, and which ones are worth more. This could also lead to talking about other ways to pay, such as paying by card.

Coins can be a choking hazard so do not leave your child unattended with them.


 

2. Choices about spending

At this age, children can spot that you can spend money in many places and in different amounts. You might be in a café buying drinks or in a shop buying food or treats. They can:

  • Start to make choices about money, such as weighing up whether to buy sweets or stickers. 
  • Understand that once you have spent the money, it is gone.

Learning together - Consider giving small sums of pocket money

If your child is asking for something, now is the time to get them to think about spending. Consider giving them a bit of pocket money and help them work out what they can afford to buy.

 


 

3. Using money

At this age, children can start to grasp that you can spend, save, or give away money. It sounds simple, but you are introducing ideas about basic budgeting, resisting temptation, and thinking of others.

Learning together - Pop coins in a piggy bank

Piggy banks are great way to start saving. It is fun and provides a safe place for their money. Make a game out of counting their cash to remind them how their savings can grow if they do not spend it.

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