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Ten steps to teach your children about money

Parents up and down the country are now working from home while also trying to find the time to teach their children. 

But it’s not just algebra they should be swotting up on. 

To help, we have compiled ten practical and invaluable, lessons for your children on personal finance…  

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A good place to start is by giving your child a simple weekly allowance. This will teach them the value of money and how to budget.

 Maike Currie, director at Fidelity International and mum to two young daughters, says: ‘It’s important to help your son or daughter use their allowance wisely — they should understand the need to set aside some money to save (for a goal), spend (treats) and share (charity).’


Many small children like to play shops or run pretend restaurants. So show them how money is exchanged for products.

Personal finance analyst Sarah Coles, of Hargreaves Lansdown, says: ‘They can get used to handling and recognising money, and they can have a go at counting out coins, too. You can also talk to them about the costs of various things, and introduce them to the idea of some things being more expensive than others.’


Try pinning chores next to envelopes of cash on a noticeboard.

Children can then pick the ones that offer them the best balance of work and reward. You could also create coupons or your own home currency to reward them for helping with household tasks.

These could be cashed in for treats or ‘banked’ to buy a big ticket item later on.

Ms Currie adds: ‘Rewarding our children for tasks will teach them the value of money, and talking to them about banking their coupons/home currency will teach them delayed gratification.’


You could offer to double any money your children are prepared to put aside in savings.

Put the cash in two separate jars — one they can get their hands on and a separate one on a much higher shelf for their savings.

Mother-of-two Mrs Coles says: ‘This will show them the benefits of saving towards their goals.

‘It can help to talk to them about what they might use their savings to buy, so they have a clear idea of what they’re putting their money aside for.’

Top up: You could offer to double any money your children are prepared to put aside in savings

Top up: You could offer to double any money your children are prepared to put aside in savings


Teach your child the difference between ‘good spending’ and ‘bad spending’. Write a list of things they want to buy online, come up with a budget, and then cross out the items they don’t really need.

‘Bad spending is when you spend loads on ‘panic buying’ items which you may very well end up throwing away,’ says Ms Currie.

‘It’s akin to spending all of your pocket money to buy sweets and having nothing left for the things you really need.’


The older generation will have their own stories to share about money. 

Mrs Coles says: ‘Older people who are less interested in their finances might want to talk about what shopping was like as a child, or how money has changed over the years; while those who are more interested could talk to children about financial concepts they may not have considered before — such as pensions or investments.’


Parents could show their children one of their payslips to help explain income tax and budgeting. 

Carla Morris, financial planner at wealth manager Brewin Dolphin, says: ‘Ask your child to write down five things they can identify from the payslip.

‘This is a good time for you to explain what gross and net pay mean. Explain why we get taxed and where the money goes; you could even get them investing in some pretend stocks.’

You can also explain how the Government spends our tax on public services such as the NHS.

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Members of your family could each choose a stock and keep track of the daily share price.

The winning stock picker could be awarded a small cash prize after two weeks.

Mrs Morris says: ‘Encourage your child to do some research and justify why they have chosen their stock.’ 

You could also teach your child about well-known billionaires who began investing at an early age. Warren Buffet bought his first stock aged 11.

Pocket money: Giving your child a simple weekly allowance will teach them the value of money and how to budget

Pocket money: Giving your child a simple weekly allowance will teach them the value of money and how to budget


Ask your child questions about what they would do with their money, such as: ‘Would you prefer to receive a one-time cash lump sum or smaller payments per month for the rest of your life?’

Encourage them to write down the pros and cons of the options available to them.

Mrs Morris says: ‘Explain why it makes sense to save early. Compound interest is simply interest on interest, but its impact is incredibly powerful.’

Use the example of a £1,000 investment paying 5 per cent interest. After one year you would have £1,050. 

Then, in year two, you would get 5 per cent of £1,050, which is £52.50, totalling £1,102.50. In year three, you would get 5 per cent of £1,102.50 which is £55.13, totalling £1,157.63.


Another way to teach your child about investment is to do the real thing.

A Junior Isa could be a great way to get children interested in finance because, once they turn 18, the pot will be theirs.

Rebecca O’Keeffe, head of investment at Interactive Investor, says: ‘Buying Facebook if your child is hooked on Instagram, or Ferrari if they are a bit of a gearhead, could help align their interest with investments which could be the best way of getting them into a lifelong investment habit.’

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