8 money lessons to teach your kids before it is too late

It’s never too early to start teaching kids about money.

Conceptually, it’s quite simple. Every action has a reaction. There are always good and bad consequences to earning, saving and spending. 

And while you can lecture your child about the good and bad bits until you’re blue in the face, it takes real-world exposure to really understand them. So here are 8 money lessons for kids to help instil a sense of financial responsibility:

1. Start with pocket money

A little money in their pockets is a necessary starting point. It doesn’t matter if it’s birthday money or earned chore money. 

Money takes time to accumulate, so it’s helpful to make that visual. A clear glass jar to keep their coins and bills in is a perfect way to watch savings grow.  It also helps get your child become familiar with money and comfortable handling it. 

Some suggest letting your children spend their money on whatever they want and making mistakes and learning from them along the way. After all, it can be eye opening to see so much of the jar empty for a candy bar.  

2. Don’t live and spend above your means

One of the best ways to teach kids about money if by involving them in adult’s spending decisions. Of course, this is only practical if you are making good decisions. 

So set a good example by living within your means and not overspending on luxury items—children notice these things. Talk to your kids about the compromises you make in day to day and one-off purchases. 

You can do this by taking them shopping with you and pointing out the different price options for food and clothes. Explain why you choose what you do. You can give kids a chance to join the action by giving them a small grocery list and a budget.

3. Practice delayed gratification 

Waiting is hard, especially when you’re a kid. But practising delayed gratification is shown to be an indicator of future success. So try to impress upon kids that if they really want something, they should wait and save to buy it. 

Practice, but try to keep their sights away from big purchases, as months of savings and anticipation build-up can be too discouraging. And share your own delayed gratification journeys as you go through them.

4. Don't give in to peers pressure

Just because others have something expensive doesn’t mean you have to have it too. That’s a tough lesson for everyone, but such is life. 

If your kid wants something with their money, ask them explain their needs and wants. Teach them contentment with what they have and how to avoid the comparison trap. Far too many people spend too much money to be the same. Try to embrace individuality.

5. Understand the power of compounding when investing

Work smarter not harder with compound interest. This is a money lesson for kids and adults alike. In an account with a 3% interest rate, £100 today becomes £103 in a year. With more money and more time, it adds up.

Coins in a glass jar are hardly going to grow by itself. (In fact its value drops due to inflation, but that’s another story). So you can start to introduce the concept when small short-term finance goals turn into bigger long-term finance goals. 

Use online calculators to show them how much money you can earn over time by saving and investing with a certain interest rate. 

6. Use digital money

Let’s get real about digital. Glass jars are only going to take you so far into the modern world. Kids today will have a much different experience with digital money than we ever did. The sooner they become accustomed to it, the better. 

So share some online banking or money tracking apps you use with your child. If the timing is right, convert all or part of their glass jar into an account so they have some personal interest.

As a personal tip, mobile banks like Starling Bank let you create “spaces” in your account where you can move and separate pots of money from your main balance. You can title a ‘space’ for each child and stop worrying about how much money belongs to whom. And several banks have accounts for kids, some of them starting from age 6.

If your child is spending money, you can also connect their account to Money Dashboard’s free personal finance app. This will give you both a nice overview and a detailed breakdown of spending habits. You can use this to start discussions about financial responsibility and priorities. 

7. Talk pensions with a grandparent

Our parents have likely more financial lessons under their belt. Especially when it comes to pension. Have them talk about their pension, how long it took for them to work towards it. Ask what aspects of their pension they are most proud of and what they would do differently if they had the chance. 

8. Give a holiday assignment

When teaching kids about money, you want it to be fun. So try teaching your child financial responsibility with a fun assignment. Put them in charge of planning a road trip or a holiday or theme park, and give a list of prices and the total budget. 

Work together to research options and watch as it dawns on them: a fancy hotel means less money for ice cream. As a bonus, if it’s all in order, take the trip!

More articles on managing money as a parent from the Money Dashboard Blog:

Managing money with a partner when you're expecting

Budgeting your child's future

How much does it cost to have a baby

How to budget as a single mum

Is it ok to borrow from your kid's piggy bank?

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