7 effective ways you can teach your children about the value of money

How often do you talk to your children about money?

It’s likely you’ll want to teach them some financial fundamentals to help them move forward with confidence.

There are any number of “financial lessons for your kids” type articles about starting with a savings account, basic investing principles, and the perils of excessive debt.

But often, the best lessons you can teach them will come from your own behaviours and interactions with them over time, rather than a “sit down and listen to this” approach.

Here are seven ways I think you can teach your children about their relationship with money that are grounded in gradual understanding rather than in a one-off talk or lecture.

1. Stressing the importance of differentiating between wants and needs

One of the keys to long-term financial security for anyone, from child to adult, is being able to distinguish between what you want and what you need.

If you muddy the waters and see every want as a need, you can end up in all sorts of financial difficulty and get into bad habits that are hard to break.

Understandably, this is a good lesson to ensure your children are aware of.

As with the other suggestions here, it’s not a matter of explaining it and assuming they’ll understand. Rather, more will come from them seeing and hearing you follow that principle yourself.

So, next time you find yourself facing a financial choice, you could explain to your child why you chose what you needed, rather than what you wanted.

2. Not being afraid to say “no” to your children

The lesson that you can’t always get what you want is an invaluable one, and one that your children may benefit from learning.

Once your children are able to control the impulse to instinctively demand things, they’ll be well placed to manage the reality of a life where that is likely to happen.

Like a lot of parents, I understand that the temptation to give in to every request, simply for some peace and quiet, is strong. But the short-term relief you get isn’t worth the future struggles that both you and your children may face.

3. Demonstrating that not everything has to be brand new or top of the range

For most people, the ultimate aim is to ensure your children are happy.

But that happiness does not necessarily come from having the most expensive version of everything they want, or from what you buy for them.

As they grow, you may need to buy new clothes every few months. Is it really worth buying top-of-the-range items each time?

Likewise, when it comes to birthdays and Christmas, if they aren’t always getting the most expensive toys or other gifts, this is likely to carry over into their own purchases when they are old enough. This may help them appreciate that the value of something doesn’t necessarily come from the price you pay.

4. Not seeing gifts as a shortcut to a healthy relationship with your children

In my opinion, the most valuable things you can give your children are your time and attention.

It’s easy to fall into the trap of seeing gifts as a shortcut to building a strong relationship. But children, especially older ones, may well resent you for trying to replace your time with endless presents and treats.

Clearly, you need to strike a balance that suits you. One of the motivating factors for working long hours is the desire to provide for your family. But setting aside time to spend with your children should be a top priority and a key driver of your work-life balance.

5. Having nuanced discussions about finance

It’s important to help make sure your children become financially aware and confident. To enable that, you can have age-appropriate conversations about money, so they understand it on your terms.

Early exposure to financial conversations and information will increase the likelihood that they will later appreciate more complex concepts, such as investing and mortgages.

You’ll be the best judge of when you will want to have these conversations. It can also help to use practical examples, such as putting money into a piggy bank, which can then be moved to a savings account when they are a suitable age.

6. Being honest about money

It’s important that your open discussions about money don’t drift into you raising personal financial concerns you may have.

It’s easy to stress a child and leave them with memories that could result in future trauma.

At the same time, though, it’s wrong to pretend that you have more money than you actually do, so don’t be afraid of saying, “We can’t afford it at the moment”.

7. Instilling the sense of achievement that comes from earning money

This can help your children appreciate at an early age that money doesn’t just appear and that most people work for it or earn it.

By extension, this explains why you spend time working and why, at some stage, they will need to work to earn their own income too.

This can also help them earn the funds they need for treats and appreciate that they can buy items you may not be prepared to purchase for them.

An obvious outcome is to have a conversation about pocket money and how they can supplement it by helping with household chores.

You might also find it helpful to add a few simple boundaries that encourage positive financial behaviours in children.

For example, if my son wishes to make a purchase that exceeds his monthly allowance, we ask him to take 24 hours to consider whether he really wants it.

Also, if he chooses not to spend any money in a given month and saves it instead, we give him a £5 bonus. In this way, we are incentivising a positive savings habit.

Get in touch

If you would like to talk about your own financial plan or any of the issues raised in this article, please get in touch.

You can call me on 07769 156 250.

Please note

This blog is for information purposes only and does not constitute advice or a personalised recommendation. The information is aimed at individuals only.

Please do not act based on anything you might read in this article. This blog is based on our understanding of current and proposed legislation, which may change.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a guide to future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.