Let’s Talk about Money – Hints and tips on talking to children of all ages about Finance

Many adults believe that people should not talk about personal money - but if we do not talk about money, that’s when financial wellbeing can suffer.

That is why this blog aims to provide you with ideas to help you talk about money with your children.

Financial wellbeing can have a huge impact on physical and mental health, so this area of education is vital to get right.

Money and Your Toddler (2-3 year olds)

Many parents think that the only thing they need to do with their toddlers when it comes to money is to stop them swallowing it.

Sure, that’s a good start 😊 but there’s a lot you can do to set your child up for a great future relationship with money.

Money can be used as an aid to learning about numbers and shapes.

You can also start to introduce the idea that money has a value and we need money to get other things. You can explain that when we work, we get money (we are paid) and we can use that money to buy things we need or want. This reinforces the idea that the things they want must be earned.

Activities you can do with your 2-3 year olds:

1. Counting money is fun and initially you don’t need to worry about the differing values of each coin – just count them into and out of jars, bowls, boxes etc

2. Sorting money – you could do this in two different ways by coin shape and by colour. This will help your child to understand that different coins have different shapes and later you can link that to the different values for each coin.

3. You can set up a pretend shop using your store cupboard contents and have them pay for items – at this stage keep it simple and just ask them to give you “3 of the small silver ones” so they can learn to sort money in a shopping situation.

4. Whenever your wallet is bulging with 2 or 1 pence pieces, give them to your toddler to save. Explain that when we want to buy something we have to save up the money. You could use a jar (ideally see-through) or you could buy them a proper moneybox or piggy bank for saving. It’s never too early to start them on saving money.

Don’t forget to have your toddler wash their hands after handling coins.

Money and your 4-6 year old

At this age, children can start to have a more sophisticated understanding of money and you can introduce the idea of the value of money - the fact that there is only a finite amount and that we should respect money. This age group can be introduced to “earning money” as a reward for certain behaviours, if this works for your family (this approach may not be right for everyone) and also that money can be lost.

Activities for your 4-6 year olds:

1. Sorting money – explain that each different coin has a different value attached to it. Give them a pile of coins and ask them to sort out all the 5p coins. This will help them understand and recognise the different coins.

2. Counting money – this helps with simple addition. Have your child count out 10p worth of coins using different values of coins.

3. You can set up a pretend shop using your kitchen cupboard contents and have them pay for items – at this stage you can price the goods at multiples of 5p or 10p to start with until they have a good understanding of those coins and then gradually bring in different coins, making the prices harder as you go.

4. When you go shopping, ask your child to read the price tags on the shelves so they understand that everything has a value and can start to get an idea of relative value.

5. Consider giving your child a small amount of pocket money each week and introduce the concept of spend/save. Perhaps have them save half the money and they can spend half the money. This also helps with understanding fractions.

It can be useful to keep your activities with money very visual – this could include having a physical moneybox or jar where your child can see their savings growing, and you could choose to top up the jar with small money rewards when your child behaves in a particular way. All of this should help encourage conversations about money and saving.

Money and your 7-10 year old

At 7-10 years of age, many children can grasp the concept of savings that they can’t actually see, so this is a good time to open a savings bank account. You could consider using a 50:50 spend/save ratio when it comes to them managing their weekly pocket money and if your child needs a bit of help with fractions/percentages, then this can be a good way to reinforce that learning.

Now is also a good time for children to become familiar with good decision making around money and that if they lose or spend all their money, then it’s not immediately replaceable.

Often at this age children want to spend all their money on one item, be it a particular type of toy, collectible or online games. Parents often struggle with the idea of letting their child have a completely free choice over what they spend their money on but this can be important because they need to learn the consequences of poor decision making. It can help them learn themselves how to make good decisions.

When a child spends all their money and is then disappointed with the purchase, this is a valuable lesson. Once the money is gone, it may not always be possible to get a refund, so they need to be sure they are making the right choice. Not allowing your child to experience a bad purchasing decision when they are young, may not adequately be preparing them for later life.

Activities with your 7-10 year old:

1. Talk about savings and why it is important to build up savings in case your income is suddenly reduced.

2. Open a savings account for them and talk to them about deposits and withdrawals. Look at the statement each month. Some banks have coin counters which is a fun way for children to pay in their savings – my kids particularly love the Magic Money Machines in Metro Bank branches and it used to be a treat to count and pay in their savings every few weeks before lockdown.

3. Create a tangible goal for saving – what would they like to buy that they need to save for. Put a picture of the item next to the savings jar or just somewhere often visible, such as in their bedroom. Help them work out how much they can save each week and how many weeks it will take to save enough. You could create a visual goal tracker that they can complete each week so they can easily see how close they are to the target.

4. Once they have saved their money, double check with them that they are completely happy with their decision to buy the item and remind them that once they have bought it, they may not be able to change their mind and get a refund.

5. Celebrate with them when they get their desired item and ask them how good it feels to have saved up for it and bought it all with their own money. This reinforces the idea that we cannot always have what we want immediately which is a useful lesson at this age.

Money and your 11-13 year old

At 11, many banks will offer a current account with a debit card attached. This allows children to spend online and in shops, but of course, there is the ability to spend more than the current balance in the account. Many of these accounts are supported by mobile apps which is a great way for your child to keep control over their money. Children are highly app-literate, so they will probably be the ones explaining how it works to you!

Things to talk about with your 11-13 year old:

1. The spend/save concept. Children may receive regular weekly pocket money or a monthly allowance as well as gifts of money for birthdays or holidays. Encourage them to save at least half by having a savings account at the bank. The other half could be either spent or saved as they choose.

2. Look around at the options for both savings and current accounts for children. This provides an opportunity to discuss comparison between financial products and the concept of receiving interest from the bank. 3. Reiterate the idea that it’s important to save for things we really want and continue to allow them to make purchasing decisions with the spend element of their money so that they are taking responsibility and learning how to make good purchasing decisions.

Money and your 14-17 year old

Teenagers may think they know everything, but they can certainly benefit from guidance on how to manage their money and not spend everything they receive from gifts, monthly allowances or part-time jobs.

More teens use online options for bringing in an income such as trading on eBay or other marketplace sites, which may bring in higher earnings than a traditional Saturday job. Whatever your teenager’s income level, you can encourage them to split it between savings and spending money.

Things to talk about with your teens:

1) Saving a set percentage or amount from their monthly allowance or part-time job, which is moved out of their current account as soon as the income arrives, to avoid it being inadvertently spent.

2) Having a longer-term savings goal is a great idea; perhaps for driving lessons or even their first car. A way to track how they are doing against target is also helpful.

3) There are a wide range of budgeting and tracking apps and since kids are all about the mobile, this is a great way to help them keep on track. Perhaps do some research together on the apps that are available as there is no ‘one size fits all’ here?

4) You could do some research together into the different options for savings and current accounts and discuss the concept of interest.

One thing to note: If your child has a Junior ISA (Individual Savings Account) they gain control of the account when they turn 16, even though they cannot access the funds until they are 18. This can provide a great opportunity to discuss savings and investments with your child.

Money and your young adult

For students, finances can be very tricky indeed. Living away from home is expensive and there are lots of exciting things to spend money on, especially when you have freedom from your parents for the first time. It’s incredibly easy to get into debt quickly if they do not keep a tight rein on spending.

Many students need to work part-time whilst studying just to pay their living expenses, so saving on top of that can be hard. However, little and often can be a great way to build up a nest egg by the end of university.

Things to consider:

1) Encourage your young adult to set up a standing order to move some money from their current account to their savings account on the day they get paid or receive their student loan. Sometimes it helps to think of this as just another expense.

2) Talk to them about saving any birthday or other cash gifts throughout the year.

3) If grandparents or other family members can help, an ISA can be a great way to help young adults build up savings. It is worth noting that from the age of 16, a young person can open a cash ISA (Individual Savings Account allowing up to £20,000 of savings to be invested in a tax-free environment) as well as continue to have a Junior ISA until they are 18 (which now allows up to £9,000 to be saved either in cash or in stocks and shares).

4) Encourage expense tracking using an app and look into roundup apps which allow small amounts of money to be saved easily as you spend.

Whatever money activities you choose to enjoy with your child, being open about money, talking about finances and helping them to understand and be comfortable around money will be an incredibly valuable experience for all of you.

The value of an ISA with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise.  You may get back less than you invested.  An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

Please note that St. James's Place does not offer Cash ISAs.