How to teach kids about money
It's never too early to teach kids the value of money – and introduce them to the importance of saving and managing money with prepaid credit cards
It's a subject that makes adults feel awkward, so it's no surprise that explaining it to children is something parents don't always embrace with gusto (especially when we still have some growing up to do when it comes to our saving vs. splurging mentality).
The festive season has us parents thinking about finances a lot: from school Christmas fetes and collections to work Secret Santa gifts to buying decorations, food and presents for our children (and nieces, nephews and godchildren, as well as all of our other family members and in-laws), money is being spent everywhere.
So we can't think of a better time of year to start explaining how money works, and the value of a well-earned pound, and teaching kids to manage their money responsibly.
Should I be giving my kids money?
Once your children start school, they are well on their way to learning the basics of adding and subtracting. Which means they're probably ready to start getting some pocket money (although this will likely happen sooner if they have older sibs). Beginning school also coincides with the tooth fairy's first visits and huge class birthdays, where children may receive cash gifts, so money starts to become something they're more aware of – if they weren't already.
Enter pocket money. While parents are divided as to whether a child should do chores to earn pocket money or should earn a set (small) amount each week regardless, the consensus among experts is that pocket money is largely a good thing. It teaches kids the beginnings of budgeting – if they want to save up for a new toy, for example – and also cements the consequences of bad behaviour, which might result in no pocket money that week.
For parents looking for a brilliant visual to illustrate what a child can earn in a month and a year with their pocket money, check out From Pennies to Pounds, a pocket money calculator, which gives kids a breakdown of their allowance and forecasts what they could be getting if they started saving each month.
Photo: Philip Veater
What's the best way for kids to save?
As any parent will attest, kids lose everything – including coins and cash. And considering we're living in an increasingly cash-less society where some retailers no longer accept our notes and coins and only take cards or contactless phone payments, is stashing money in a piggy bank or under a pillow going to teach our kids much of anything?
The new way that parents are teaching young kids about financial responsibility is through prepaid debit cards, linked to apps the parent oversees. These cards – from companies like nimbl, Osper and goHenry – allow kids to shop online or make a purchase using contactless, so they start understanding where their money is going and how much they need to accumulate to get something they want. It also helps improve their maths – in a major way.
Parents like these prepaid cards, which typically charge an annual fee (with Nimbl, for example, you get the first month free and then pay £15 for the year per card), because parents have more oversight than they would just handing cash over to their children, with alerts whenever children use their card somewhere. It's also easy for parents to add money onto the card from their account, set limits on weekly spending and use controls to block certain transactions. Prepaid cash cards for kids are definitely the way of the future.
Nimbl card transactions
Top tips on how to teach children financial responsibility - especially around the festive season
Clint Wilson, founder of nimbl, gives Culture Whisper his top tips on what to do to make finances seem less abstract for kids and how to talk to them about money and festive-season spending:
1. Involve children in the Christmas family food shop
When you head out to purchase your Christmas turkey and brussels sprouts this year, take your children along for an extra pair of hands for you and a festive learning experience for them. Setting a Christmas food budget and involving your children in selecting the best value food options helps to provide guidance with what is, or isn’t, a reasonable purchase, and introduces them to the idea of budgeting.
2. Say no to excessive spending
Buying Christmas presents for the family doesn’t need to cost the earth, especially for children! A family Secret Santa with just one gift or setting a budget to spend on individual presents helps curb excessive spending. If children want to surprise a relative with an extra-special gift but aren’t sure they have the budget, joint presents with siblings are a great way to double the budget and pull off the surprise.
Encouraging them to contribute towards bigger presents for other family members can help them appreciate just how expensive that new Xbox really is!
3. Understand the real value of Christmas gifts
Christmas is a great time to teach children the true value of gifts. Explain to them that the cost of a present isn’t the same as its value – homemade Christmas cards or presents can be incredibly touching, whilst also providing children with some fun and entertainment. Making gifts personal or personalised – adding a relative’s name or using a special photo – is certain to ensure they are really treasured.
4. Get ready for Christmas in advance
Organisation is key when it comes to Christmas preparation, but many people tend to leave their shopping until the last minute! Teaching your children to stagger buying gifts across the year can help them factor the cost into their monthly budgeting. Make sure your children know they don’t have to buy the first thing they see; by leaving enough time to shop around, they may be able to find better, or cheaper alternatives. Encouraging them to shop in pre-Christmas sales, such as Black Friday and Cyber Monday, are a great way to find bargains both in-store and online. Alternatively, children could consider buying gifts in the Boxing Day sales, especially for relatives visiting after Christmas Day!
5. Try arts and crafts instead of shopping
Cards and presents aren’t the only things children can make to save money – DIY Christmas decorations and food are also a great way to teach them about how to celebrate Christmas on a budget. Homemade treats like gingerbread men, or for the more advanced baker, mince pies, are fun for the family to bake together and can be more cost-effective than buying pre-made goodies. Children can also help with decorating the house on a budget, making paper snowflakes or chains from scrap paper, as well as baking salt dough Christmas tree decorations.
6. Putting that loose change to use
Teach your children to save up any loose change throughout the year and put it towards their Christmas budget. Having just a few extra pounds to spend on Christmas gifts can make a big difference for children – they can even help to contribute towards the family Christmas food budget by buying ingredients for homemade Christmas treats.
7. Charitable contributions for Christmas
The real spirit of Christmas is giving, and that doesn’t have to involve material gifts! Rather than spending money on Christmas cards or presents, children could donate the money they would have spent to charities – this can even be personalised by asking the recipients their preferred charity. Donating any unwanted presents to children’s charities or hospitals is a great way to support other less fortunate children, and a great way for children to truly embrace the Christmas spirit.
Nimbl's pre-paid card