How To Teach Kids About Money: 14 Financial Must-Knows

Parents and educators face a crucial challenge in today’s complex financial landscape: how to teach kids about money effectively and early. With studies showing that only two-fifths of young adults in the UK are financially literate, and 61% not recalling any financial education at school, the stakes couldn’t be higher.

Financial capability is a crucial life skill that impacts everything from daily decisions to long-term security. This guide explores practical strategies and essential concepts to help you equip the next generation with the knowledge they need to thrive financially.

Why Financial Education Matters

Teaching kids about saving isn’t just about pocket money and piggy banks – it’s about setting them up for lifetime success. Research from MyBnk and Compare the Market reveals that among young adults who hold credit cards, only 44% are considered financially literate. Even more concerning, those who are unemployed show the lowest levels of financial literacy at just 26%.

The socioeconomic gap in financial skills emerges early. According to research from FFT Education Datalab, by age 11, there is already a significant difference between socioeconomic groups of around 13 places in financial skills ranking. By age 17, this gap widens to 14 places, with disadvantaged children having similar financial skills just before leaving secondary school as advantaged children have at age 11.

Despite financial education being on the curriculum for state secondary schools in the UK, 80% of schools in England are academies that can opt out of this requirement. This leaves many children without structured financial guidance during their formative years.

When to Start Teaching Children About Money

Many parents wonder about the right time to begin teaching children money management. Experts suggest that children as young as three can grasp basic concepts about money. By ages 5-6, children can understand that money has value and is used to buy things. This early stage is perfect for introducing simple concepts through everyday activities.

How to teach kids about money effectively begins with age-appropriate lessons. For young children, focus on tangible experiences like counting coins or making simple choices at the shop. As they grow older, gradually introduce more complex concepts like saving for goals, budgeting and eventually investing.

The 14 Financial Must-Knows for Kids

1. Money Basics: What It Is and How It Works

Before diving into complex financial concepts, ensure children understand what money is and how it functions in society. Money games for kids provide an engaging way to teach these fundamentals. Games like “shop keeper” where children exchange toy money for goods help solidify the concept that money has value and is used for transactions.

For younger children, using physical coins and notes helps make the abstract concept of money more concrete. As they grow older, introduce digital money concepts, explaining how money works even when we can’t see it, like with bank cards and online payments.

2. Earning Money: Work and Reward

Teaching kids about earning money helps them understand that money comes from work. Even young children can grasp this concept through age-appropriate chores and rewards. For primary school children, a simple chart tracking chores completed and money earned creates a visual connection between effort and reward.

Older children can explore broader earning opportunities like helping neighbours, selling homemade crafts or offering services like dog walking. These experiences teach valuable lessons about initiative, responsibility and the relationship between time, effort and compensation.

3. The Value of Money

How to teach children value of money requires both explanation and experience. Children need to understand that money has different values and that prices reflect what people are willing to pay for goods and services.

A practical exercise involves giving children a small budget and taking them shopping. Let them make decisions about what to buy within their budget. This hands-on experience helps them understand trade-offs and opportunity costs – when they choose to buy one thing, they may not have enough for something else.

4. Saving: Delayed Gratification

One of the most important financial skills is the ability to delay gratification by saving for future goals. Financial literacy for children should emphasise this concept early and often. The marshmallow experiment, a famous study on delayed gratification, showed that children who could resist eating one marshmallow to receive two later often achieved better outcomes in life.

To teach saving practically:

• Help children set specific saving goals with visual trackers
• Provide clear jars or piggy banks where they can watch their money grow
• Celebrate milestones along the way to keep motivation high
• Consider matching their savings for important goals to encourage the habit

5. Smart Spending and Budgeting

How to explain saving money to children works best when paired with lessons about thoughtful spending. Children need to learn that all spending involves choices and trade-offs. Teaching teenagers about budgeting can begin with simple frameworks like dividing money into categories: spend, save and share.

A practical approach is the “want vs need” exercise. When children ask for something, help them categorise it and discuss whether it’s worth the cost. For older children, introduce more sophisticated budgeting concepts like tracking expenses and planning for larger purchases.

6. Banking Fundamentals

How to introduce banking to kids starts with explaining what banks do and why they’re important. Around age 8-10, consider opening a children’s bank account. Many UK banks offer special accounts for young people with educational resources and simplified features.

Take your child to the bank in person and explain the process of depositing and withdrawing money. Show them bank statements and discuss how interest works – that the bank pays them for keeping money there. As they get older, introduce online banking under supervision, teaching digital literacy alongside financial skills.

7. The Power of Compound Interest

While young children may not grasp the mathematics of compound interest, they can understand the concept that money can grow over time. Financial education for young children should include this foundational principle.

A simple demonstration involves showing how a penny that doubles every day would grow to over £5 million in just 30 days. Visual aids help make this abstract concept more concrete. For older children, use online calculators to show how their savings might grow over many years with regular deposits and compound interest.

8. Responsible Borrowing

By the teenage years, children should understand how borrowing works, including the concept of interest paid on loans. Financial responsibility for teenagers includes knowing the difference between good debt (education, home ownership) and problematic debt (high-interest consumer debt).

Role-playing exercises can be effective: have teens calculate the total cost of purchasing something with cash versus credit. This helps them see how interest increases the final price of items bought on credit.

9. Understanding Risk and Insurance

Children should learn that risk is part of life and financial decision-making. Money lessons for primary school can introduce the concept of insurance as protection against unexpected events. Analogies work well here – explain insurance like a safety net at the circus that protects performers if they fall.

For older children, discuss different types of insurance (health, home, car) and why people choose to pay a small amount regularly to protect against larger potential losses.

10. Digital Money Safety

In today’s digital world, explaining money to young children must include online safety. Teach children about protecting financial information, recognising scams and using digital payment methods responsibly.

Create a family policy for online purchases, requiring parental approval and regular discussions about digital spending. For teens, address specific concerns like in-app purchases and subscription services that can lead to unexpected charges.

11. Charitable Giving

Teaching children about spending wisely includes lessons about generosity. Research suggests that giving makes people happier than receiving. Help children identify causes they care about and incorporate giving into their money management plan.

Family giving traditions, like holiday donations or regular volunteering, reinforce the importance of using resources to help others. This teaches empathy alongside financial literacy.

12. Money and Emotions

Many financial decisions are driven by emotions rather than logic. Money activities for preschoolers can begin to address this by helping children identify feelings about money and possessions. Simple questions like “How do you feel when you really want something?” open conversations about impulse buying and emotional spending.

For older children, discuss how advertising targets emotions and how peer pressure can influence spending decisions. Role-playing scenarios help them practice making thoughtful choices despite emotional pulls.

13. The Basics of Investing

By the teenage years, children can understand the concept of investing for long-term growth. Saving money games for kids can evolve into more sophisticated discussions about different investment types and strategies.

Use relatable examples: explain that buying shares is like owning a tiny piece of a company they know, such as a favourite toy manufacturer or technology company. Track a few companies together over time to demonstrate how investments can grow (or sometimes shrink).

14. Planning for the Future

The final financial must-know involves helping children develop a future orientation. Children’s books about money management often address this by showing characters working toward long-term goals. Extend these lessons by helping your child think about their own future.

For teenagers, introduce the concept of retirement savings and the power of starting early. Demonstrate how small amounts invested during their 20s can grow significantly by retirement age thanks to compound interest and time in the market.

Practical Strategies for Parents and Educators

Age-Appropriate Pocket Money for Kids Age

The amount of pocket money should grow with responsibility as children age. UK data suggests:

• Ages 4-6: £2-£3 weekly for basic spending lessons
• Ages 7-10: £4-£6 weekly with saving expectations
• Ages 11-13: £7-£10 weekly with budget categories
• Ages 14-16: £10-£15 weekly with increased financial responsibility

The value isn’t in the amount but in the consistent opportunity to practice managing money. Some families tie pocket money to chores, while others provide a base amount with the opportunity to earn more through additional tasks.

Everyday Teaching Moments

How to teach kids about money doesn’t always require formal lessons. Daily activities provide natural opportunities:

• At the supermarket, discuss comparison shopping and value
• When paying bills, explain household expenses
• During advertising breaks, analyse marketing tactics
• When planning holidays, involve children in budgeting

These real-world applications help children see how financial concepts apply to everyday life.

Saving Money Games for Kids

Learning through play is highly effective for children of all ages:

• “Coin Race” – Sort and count coins against a timer
• “Market Day” – Set up a pretend shop with price tags and transactions
• “Budget Challenge” – Give older children a set amount to plan a day out or meal
• “Investment Simulation” – Track imaginary investments in companies they know

Digital resources like apps and online games can supplement these activities, though hands-on experiences tend to have the greatest impact.

How to Talk to Kids About Family Finances

Many parents hesitate to discuss money matters with children, but age-appropriate transparency benefits everyone. While you shouldn’t burden children with financial stress, involving them in some family financial discussions teaches them that money can be discussed openly and thoughtfully.

For younger children, explain basic household costs and priorities. For teens, consider sharing more details about family budgeting, perhaps involving them in planning for holidays or large purchases.

Resources for Financial Education

Money Activities for Preschoolers

For the youngest learners, focus on fun, concrete experiences:

• Sorting coins by size and colour
• Playing shop with toy money
• Reading picture books about money concepts
• Counting activities that develop number sense

The Children’s Money Advice Service offers free resources specifically designed for this age group, including downloadable activities and parent guides.

Primary School Resources

During primary years, children are ready for more structured money lessons for primary school:

• Young Money (formerly pfeg) provides free teaching resources aligned with the UK curriculum
• Money Saving Expert has a free “Teen Cash Class” guide adaptable for upper primary
• Red Cross offers a “Positive Pence” programme combining financial literacy with social responsibility

Many UK banks also offer school programmes and workshops designed for primary-aged children.

Secondary School Support

By secondary school, teaching teenagers about budgeting and more advanced concepts becomes essential:

• MyBnk delivers financial education workshops in schools across the UK
• The London Institute of Banking & Finance offers a Certificate in Financial Studies for teens
• Young Enterprise runs programmes combining entrepreneurship with financial literacy

Digital resources like the Money and Pensions Service’s MoneySense programme provide interactive tools specifically designed for UK teens.

The Impact of Early Financial Education

Research consistently shows that early financial education has long-lasting benefits. Children who receive regular money lessons show:

• Greater confidence in managing their finances
• Improved mathematical skills
• Higher likelihood of saving regularly as adults
• Lower rates of problematic debt in adulthood
• Better decision-making abilities across various life domains

How to teach kids about money effectively now pays dividends for their entire future. The skills they develop through financial education extend far beyond money management to include critical thinking, delayed gratification and responsible decision-making.

Overcoming Barriers to Financial Education

Many parents feel ill-equipped to teach financial concepts, especially if they struggle with their own finances. Remember that you don’t need to be a financial expert to start teaching children about money. Being honest about your own learning journey can be powerful modelling for children.

Schools face similar challenges, with 80% of teachers surveyed by MyBnk citing time constraints as a major barrier to delivering financial education. The research found that on average, students who receive financial education get only about 48 minutes per month – 33 times less than the average time spent studying maths.

Partnerships between schools, parents and financial institutions can help bridge these gaps. Many banks and building societies offer free workshops and resources designed to supplement school curricula and support parents.

How to Teach Kids About Money: Building Financial Resilience for Life

Financial education isn’t merely about teaching children to count coins or save pocket money – it’s about equipping them with critical life skills that foster independence, confidence and resilience. When we teach children about money, we’re actually teaching them about choices, values and consequences.

The most successful financial education happens in everyday moments – explaining why you choose one product over another at the supermarket, involving children in household budgeting discussions or helping them work through their disappointment when they can’t afford something they want immediately.

Research from Cambridge University reveals that money habits form as early as age seven, meaning these early conversations have profound, lifelong impacts. What’s particularly encouraging is that financial capability isn’t inherited – even parents who struggle with money management can raise financially savvy children by fostering open discussions and providing consistent learning opportunities.

The National Financial Educators Council found that lack of financial knowledge costs the average UK adult £1,600 annually through fees, interest and poor decisions. By teaching your children strong financial habits now, you’re potentially saving them tens of thousands of pounds over their lifetime while empowering them to make confident, informed choices.

Perhaps most importantly, financial education provides children with something invaluable: options. When young people understand how to manage money effectively, they gain the freedom to pursue their genuine interests and values rather than being trapped by financial necessity or poor decisions.

As the Money and Pensions Service aptly puts it: “Financial wellbeing isn’t about being rich – it’s about having control, making choices and feeling secure.” By investing time in financial education today, you’re giving children the greatest gift possible: the power to shape their own futures.