We all want our children to be happy and financially comfortable. We want them to become adults who can steer clear of problem debt, save for financial goals and manage their money without drama.
And parents have a huge amount of influence over this. Analysis carried out by the University of Cambridge suggests that by age seven, children can already grasp some significant financial ideas that can shape their future financial habits. That means it’s important for parents to encourage financial literacy early on; so here are some ideas for achieving just that.
1 Talk about money at the dinner table
Money is a notoriously tricky subject, and that often leads to all sorts of issues – from couples not discussing joint financial decisions to people hiding their debt concerns.
As parents, you can demonstrate a healthy attitude to talking about money. That doesn’t mean worrying children unnecessarily about a large bill or your own debts, but rather chatting casually and openly about day-to-day finances such as the household budget, how much you spent on groceries that week and what you’re saving for at the moment.
This teaches them to think about more complex financial concepts, but most importantly, it gets them used to talking about budgeting and money.
2 Give them some regular money to manage
Children can’t learn everything from theory, they need some practical experience too. Pocket money is a really good way to help them learn those early money lessons and to build their own financial confidence.
Sometimes those lessons will be hard for parents to watch – especially the lesson that if you spend all your money on sweets, you’ll have to wait to buy the thing you really want. But it’s better they learn those lessons now, rather than when they are in the adult world and able to apply for a credit card.
3 Include digital money as well as physical cash
Many parents think of pocket money as handing over physical coins because that’s how we experienced it, as well as being how the term originated. However, today’s children are growing up in a digital age, where most of us pay our way with plastic and manage our finances through apps on our smartphones.
Child-friendly debit cards and apps, such as Kite by Starling Bank, are a great way to prepare your child for handling money in the real world. Kite gives parents full oversight and control over their children’s personal finances, while allowing kids to build up their confidence around digital finances and gain some independence.
4 Involve them in your financial decisions
Obviously I’m not suggesting handing over full financial control to your six-year-old, but it can be really powerful to give your children a window into your household budget. This can be as simple as explaining why you’re buying an own-brand product at the supermarket or how you’re going about saving for a holiday, and asking for their thoughts and opinions.
With older children, you could even let them practise their budgeting skills on smaller financial decisions, such as letting them manage the food shop for a week. The more confidence they can build in a safe environment, the better.
5 Discuss the cost of living crisis
Everyone is being affected by the rising cost of living, and children will genuinely benefit from understanding why we are in a crisis. You could watch the news together, or show them your rising energy bills, to help them understand why things are currently so tight.
Even if your family hasn’t been hugely impacted by rising prices, there will likely be pupils in your children’s school whose families are struggling. Talking about the issue will help them have compassion and build a solid foundation of knowledge for them in later years.
6 Make sure you’re fair
By managing some of their own money, children learn important lessons about becoming an adult. But there are some financial lessons they shouldn’t have to learn – and inequality is one of them.
As they grow older and enter the workforce, your daughters may experience the gender pay gap – where they don’t earn as much as their male peers. But astonishingly, research commissioned by Starling Bank has found that this disparity often starts in childhood.
Not only do boys typically receive 20% more pocket money than girls – £3 a week compared with £2.50 – but girls and boys are often incentivised in different, stereotypically gendered, ways; while girls are more likely to receive pocket money for chores, boys are more likely to be rewarded for academic achievement.
And sadly, this inequality can have a lasting effect.
“This sets girls and boys off on a very different footing from a young age, which can impact their financial literacy development,” explains Tim Jay, professor of psychology of education at Loughborough University, who conducted the research.
With tools to help your children build their financial confidence, and full oversight for parents, Starling Bank’s award-winning Kite debit card and app is simple, secure and convenient. Sign up for Starling Kite before 31 January 2023 and get your first month free. It then costs just £2 per month. Find out more at starlingbank.com/current-account/kite-debit-card-for-kid