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How can I Teach my Child to Manage their Money?

To teach money management to your child, start when they are young. Get them to save up and let them make their own mistakes. Don’t shy away from talking about money – it’s vital that children understand finances before they face the big wide world

Child's hand putting money into a piggybankMoney is a necessary part of life but many of us are not great at managing it well! Surprisingly, such an important topic is not taught in schools so it’s up to us parents to financially educate our children. Most parents have no problem instilling good manners and road safety to their children but, when it comes to money, things aren’t so simple. With mum and dad being the biggest influence on children’s behaviour, any bad habits are all too often passed on. So, how can we teach children to manage their money? This guide will give you some useful advice.

When should I start to teach my child about money?

You might not think so, but children are able to understand the choice between saving and spending from as young as 3 years old. What’s more, research conducted by the University of Cambridge found that adults’ habits with money have been set by the time they are 7 years old.

Knowing this, it’s important to start teaching your children about money as soon as possible. Once they have learned to count, start talking with them about money and what they can do with it – save up for a new toy or buy some sweets now, for example.

Instead of buying a treat for your child, give them a little money and let them choose how to spend it themselves – either on a banana or a small toy for example. But make sure you offer them the choice to save it up so they can eventually buy something bigger.

Another opportunity to teach money management is when your child is given money as a gift, perhaps by a relative. This is a perfect scenario in which to discuss the benefits of saving versus spending.

How can I get my child familiar with money?

Young children can be introduced to money with role play, for example, by playing ‘shopkeepers’. When they are a little bit older then let them handle and spend their own money. This will help them learn to value money - they can see that it can be exchanged for things they want now or saved for something they want in the future. Saving and then spending also teaches them that, once spent, money is gone. To spend more they’ll have to save up again.

Older children can also be taught about money management by helping with the weekly shop. Get them involved in writing the shopping list as this will help them to understand how the cost of essentials soon adds up. At the shop itself, you could ask them to find the best value items, perhaps rewarding them by giving them any money they manage to save – that’s a good way to instil an economical attitude and may make them more aware of looking for the best price when buying anything.

How can I teach my child to save money?

‘I want it now!’ I’m sure the vast majority of parents have heard this cry from their child. It’s an important lesson to learn that, if we really want something, we have to save up to buy it and that takes time.

For younger children, piggybanks are a good idea. Whenever they are given money, be it pocket money, a gift or a reward, encourage them to put some of it in the piggybank as savings. It doesn’t have to be much (how much exactly is up to them) but you could suggest spending half and saving the rest.

With older children, teenagers specifically, it can be hard to talk about saving. If they have a certain goal, like buying the latest trainers or games console, encourage them to budget and set aside some money every week. Having to save up to buy things may even motivate them to take a part time job!

You might feel a little cruel, denying your child what they want. But learning to manage their money now will help children no end in adult life.

Should I let my child be responsible for their own spending?

As parents, we hate to see our children making mistakes. We want to protect them but mistakes are often the best teachers! Once you’ve handed money over to your child it becomes theirs, so let them spend it how they wish. You can offer them advice but, even if they are being rash, allow them to take responsibility - and suffer the consequences!

Imagine that your child has £5.00 to spend. You know that they’ll need £3.00 for the disco on Thursday, but today is Saturday and they decide to spend all of their money now. When Thursday comes, don’t be tempted to give them more money. Instead, they’ll have to miss the disco and that should be a lesson learned. This may sound harsh but if they learn to budget now the same problem shouldn’t happen again. This lesson will help them to make sound financial decisions in the future.

How can I teach my child the value of money?

Children of all ages can have a problem understanding the value of money. To them, any amount over £10 is a large sum so, if they hear that their parents earn £20,000 a year, they’ll think they’re rich. That being the case, they may feel hard done by when you won’t spend £400 on the latest games console for them.

To help with this, explain to your child the difference between wanting something and needing it. Groceries, electricity, a mortgage, car payments, insurance… all these add up and they have to be paid. Luxuries, like games consoles, are different. We don’t have to have them and, if we want them, we have to save up.

To make it more relevant to children you could explain the difference between things they need, like food, clothes or school equipment, and things they want, like sweets, games or days out.

When children understand that they can’t have everything they want, they are more accepting when you say no to them. Learning to accept ‘no’ as an answer is another important skill for adult life. We all hear it from time to time, whether from our bosses or our bank managers, so the sooner children get used to it, the better.

How much pocket money should I give my child?

Pocket money is an excellent way to begin teaching money management. It gives children the chance to save and spend, thus familiarising them with money and helping to get them into good habits. Pocket money in return for doing chores is better still. It teaches children that money doesn’t grow on trees and has to be earned before it can be spent!

So, how much money should you give your children? Ultimately that’s up to you but, to help give you an idea, here are the average amounts children of different ages receive, according to the money management website, Rooster Money:


You can also use pocket money to teach children about budgeting and making their money last. Younger children have difficulty understanding time so you should pay them weekly. Older children however should be more astute. You may want to move from weekly to fortnightly payments when your child starts secondary school, or even before, and perhaps monthly payments by the time they are 15 or so. That way, a monthly salary when they start work won’t seem like such a long wait!

What’s the best way to teach my child to manage their money?

For all the time they spend at school, children learn the most from their parents. You can tell them to save up as much as you want but, if they see you spending money when you can’t afford it, then they’ll most likely copy you. The best way to teach your child to manage their money is to lead by example.

Young boy doing gardening to earn pocket money

Using credit cards to buy luxury items, or going on shopping trips every weekend, can lead to children developing an unhealthy attitude towards money. They may come to associate spending with pleasure and think that money comes from a never-ending pot. Instead, save up for luxury purchases and only treat yourself (and your children!) when you can afford it.

You should also be honest about money and avoid lying. That doesn’t mean that you should tell your children all of your financial affairs! But it does mean that you should speak openly about expenses and costs. If your child asks you a question you don’t want to answer, then tell them so, rather than fobbing them off with a half-truth or a lie.

So, how can you teach your child to manage their money? By starting when they are young, teaching them about saving up, and letting them make their own mistakes. Don’t shy away from talking about money with your child. It’s vital that they understand finances before they embark on their journey into the big wide world and, whatever skills they can pick up now, will serve them well as they travel through life.

For more guidance, tips and advice for parents, take a look at Education Quizzes’ Knowledge Bank. We have a library of articles, each one aimed at providing answers to specific questions asked by parents. So, whether you want to know about the cost of university, special educational needs, online safety or promoting self-confidence in your child, you’ll find a mine of useful information right there at your fingertips.

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