Teaching our kids basic money skills early on will not only give them the tools to build wealth, but more importantly, help them steer clear of financial pitfalls.
I know I talk about financial literacy a lot … it’s something I’m really passionate about. But honestly, I can’t help but wonder how much financial strife could be avoided if people were given an education in this from a young age. It is such an essential life skill.
Here’s what I believe we should be teaching our kids now. Trust me, this will set them up for a financially secure life:
1. How to save and set goals
Saving and goal-setting are Money Management 101. Start by talking to your kids about their financial goals (saving for a toy when they’re little or a car when they’re older) and how they plan to reach them. Saving for savings sake is pretty boring, they need a goal.
For younger kids, a piggy bank works great, while older kids can use online equivalents like Spriggy and Bankaroo which also allow parents to manage pocket money and transfer funds from a ‘parent wallet’, but be mindful of fees. A bank account and debit card can also earn interest, which is a helpful bonus.
2. Saving before spending
In our Buy Now Pay Later culture, this is one we really need kids to get a grasp on early: Save your money first before spending it.
It’s a general money rule to live by to avoid debt, but also, to practice delayed gratification.
3. The power of compound Interest
Opening a savings account is a great way to introduce kids to how money can grow over time. Explain how interest works – that the longer they save, the more money they can earn with interest.
For little kids, you can play the “Compounding smarties game”:
Give them 10 Smarties as their “money” and explain they’ll earn more over time. For example, after a minute, they get one more, bringing it to 11. The next minute, interest is paid on 11 Smarties (worth two Smarties), and so on. Keep going until someone eats their investment!
4. How to earn money
They may be too young for a part-time job but it’s never too early for kids to try to find creative ways to make money. Holding a street stall where they sell their old toys or having a lemonade stand, will help them to explore entrepreneurship, practice money-handling, and the concept of profit – what’s left after deducting the cost of making the product.
Other ways to earn money can be offering services like dog-walking, or by helping around the house. Link these jobs to pocket money.
With our four kids, they had ‘family jobs’ which are just part of life – make your bed, keep your room tidy etc. Then they had ‘pocket money jobs’ which helped Libby and I – unpack the dishwasher, fold the washing etc. We also stipulated that they could spend 50 per cent of their pocket money, had to save 40 per cent for an agreed goal (which we often matched dollar for dollar depending on the goal) and 10 per cent had to be donated to a charity of their choice to show them they need to care for their community.
Making money helps kids understand it is earned, not just given.
5. How to stick to a budget
A budget is about more than just allocating money … it’s about setting intentions and practicing self-restraint.
A fun way to teach this is by giving kids a small amount of money to spend at a discount store, with specific items to buy, like “something blue,” “something for school,” and “something for you.” They’ll need to stick to the budget and make smart choices to get everything without overspending.
6. Understanding how credit works
It’s crucial for kids to understand how credit works and what borrowing money really means.
For younger kids, play a reverse version of the Smarties game. This time. take away a Smartie every minute, showing them how debt can increase over time with interest.
For older kids, explain how credit cards work and why paying off debt on time is essential. If you like, you can share your own real-life stories or people they might know that demonstrate the dangers of bad credit, to help them understand its impact.
7. Being a good consumer
Becoming a savvy shopper can be one of the greatest financial gifts you can pass on to a child. But you need to lead by example.
At the supermarket show the difference in price between brand name and lesser known equivalent products and what you can do with the difference. Show them comparison websites like Compare the Market and how prices for big bills can vary so much. When buying clothes at a shop, ask the shop assistant “is that your best price” to show there is no harm in asking – they can only say no.
8. Recovering from financial mistakes
Our kids will one day make a bad money decision or two, but the key is helping them bounce back. If they spend their money impulsively or don’t save enough, help them learn from their mistakes and make better decisions in the future. Let them feel the pain of loss or being scammed so they can make better decisions in future.
9. Being wary of scams
Talking of scams, kids encounter these early in today’s digital world, especially in online gaming or through social media.
Teach them how to spot them!
- If it seems too good to be true, it probably is – no-one gives away free stuff without a catch.
- Don’t share personal info – this includes passwords, address or bank information – with online strangers.
- Look for red flags – unfamiliar numbers, poor grammar, or requests to “Act now!”
- Check before clicking – teach them to go directly to a website rather than trusting an email link.
- Encourage your kids to tell you if they get a suspicious message, offer or something just feels ‘off’.
By teaching these money-management skills, you’re setting them up to feel confident, secure, and smart with their money for years to come.
