The importance of financial education for kids
At Lowell, we understand that your financial situation, especially struggling with debt and feeling out of control, can have a real impact on mental health. We believe that learning about the value of money at a young age can really help to teach good financial habits which will last a lifetime.
That's why we're hoping to start an honest conversation about the importance of financial education for kids, along with providing you with some ideas on how to teach your child about the value of money.
This content is intended to be an impartial guide regarding teaching kids about money. Lowell Financial Ltd does not offer financial advice. You can find out more about the organisations you can contact in our guide on debt help and support.
Why is it important to teach children about money?
Teaching kids about money early in life can really help to create good financial habits before they become financially independent and head out into the world.
Starting from an early age means that they can learn how to manage money effectively and put it into practice as much as possible in an age-appropriate way. This also means that in the future they can be confident and make informed decisions.
How to teach kids about money
Good financial health can start early and will help to set your children up for the future. Learning to have a healthy relationship with money can help to avoid future stress and worry, and support mental health, even in children.
Whether you’re the parent, grandparent, or guardian, there are things you can do that will make a difference. If you're not sure how to teach your child the value of money, here are a few ways you could start.
1. Use small examples to demonstrate budgeting
Even young children can learn about budgeting on a small scale. The next time you're in the supermarket or shop, for example, show them that for the same price, you could choose several small 'pick and mix' sweets, or save up for a larger chocolate bar.
We’ve actually got our own budget calculator tool that might help you do this in a more interactive way. You could either use your circumstances as an example or do a few different scenarios to show how different factors will impact a budget. You may also find it helpful to look into budgeting and money management apps, such as Snoop.
2. Consider how to show the value of money in 'real life'
Knowing how to teach your child the value of money might sound scary. But if they can grasp the example with sweets we just mentioned, teaching the value of money in real life might just mean pointing out how much things cost when you're doing your weekly shop.
When you're doing a weekly shop, show them how many apples you can buy with a 50p piece, or how many pounds they'd need to save up to buy a toy. Putting even a small amount of money in context can help to teach your child the value of money in the real world.
3. Discuss wants and needs
Generally speaking, an important life lesson for children is understanding the difference between wants and needs. The reason this is particularly relevant when it comes to financial education is because having this knowledge will help them make informed decisions regarding their spending in the future.
4. Encourage them to earn money and manage that independently
Giving your child the opportunity to earn their own money and letting them spend this money however they wish will help them begin to understand the value of money. There are various ways you could encourage your child to earn money, such as doing household jobs, babysitting, or selling unwanted items.
The money lessons that your kids could learn from this include understanding that, if they want to buy an item that they can’t yet afford, they’ll have to save up and continue earning to be able to do so. Alternatively, if they spend it all then they’ll have to wait until they’ve earned more to be able to make other purchases.
5. Have open and honest conversations about digital money
With the rise of technology, it’s important for adults to be open and honest about digital money with children so that they understand how it works and how to stay safe and avoid fraud.
Be sure to try talk through the different types of digital money experiences they might come across, including:
- Banking apps
- Making in-app purchases
- Buying things online
- Using gift cards, phones, cards, or smartwatches to make payments
It’s important that they understand the value of digital money and that it isn’t just a physical thing.
Teaching kids about money: what we wish we knew
Here are some other simple financial tips and suggestions that we think would be helpful to know at a young age.
Everyone worries about money, and help is available
Money is important, and it's normal and healthy to worry about money a little bit. But if money issues become overwhelming and you struggle with financial stress, it's also important to understand that you have options and that there are organisations who can help you. You can find out more about who these organisations are in our debt advice and support guide.
At Lowell, we work with some fantastic independent charities and organisations who are there to help. We think it's important that everyone knows from a young age that help is available and that you don't have to worry or struggle alone.
How interest works
Understanding interest - and how it works when you borrow money or take our credit - is key to good financial health. That's why we think it's important to learn about it when you're young and developing new financial habits that could last well into adulthood.
Learning how interest is added to debt could help you to avoid becoming overwhelmed with expensive debts, with interest piling up if you aren't able to make repayments in a timely fashion.
How to shop around for the best deals
When you're young, it's easy to just accept that the given price is the only price. But it's important to understand that you can always shop around for the best deals to save money. Whether it's home insurance, credit card rates or even just a pricey item that you want to buy, it's always worth doing research before making an investment.
Teaching kids about money whilst they’re still young can help to encourage good financial habits from the start. At Lowell, we believe that being open and honest about money and debt can help to remove the stigma around struggling with finances and start conversations about how we can help others.
If you’re concerned about your situations, there are lots of trusted organisations who can offer you expert advice tailored to your situation, including StepChange and Mind. We’ve also got a separate guide on debt and mental health which discusses the relationship between the two in more detail.
For more helpful information on a range of finance and debt-related topics, take a look at our Debt Guidance Area.
Published by Libby Davies on 10th May, 2021
Last updated by Jack Walker on 21st October, 2024