Teaching the children to be money-savvy

Top tips for teaching your children or grandchildren about saving money and embracing good financial habits.

With the rising cost of living putting pressure on already-strained household finances, knowledge around saving money and good financial habits has never been more important. So now could be a good time to help teach the young ones in the family how to be responsible with their money, as well as how to be prepared for all eventualities.

To help make those money lessons a little easier – and fun too – here are some tips for teaching your grandchildren all there is to know about saving in the digital era.

1) Practise pay cheques

Creating a system where children can earn pocket money, no matter how much that may be, is a great way to get them used to good money habits - whether that’s by completing chores or tasks, or splitting birthday or Christmas present money into instalments over the course of the year. Try to make it consistent too so they know what to expect.

With cheque books a thing of the past, and cash far less common in today’s society, consider talking to their parents about setting up an online account for them that allows them to watch their balance grow over time.

2) Budgeting

Practising budgeting tactics is a key element of financial literacy, and it’s especially important given rising costs of goods and services.

Incorporating budgeting activities and agreeing on mini saving goals is the perfect way to give children an overview of their finances. You could ask them to seek out new ways to keep costs down and report back – you might be surprised at their ingenuity.

To help older children visualise how much money they have to play with, have them write a list of all their monthly incomings and outgoings, including subscriptions and money for treats. Don’t leave anything out and try to encourage them to put regular amounts away as savings too. Make sure to let them know about the benefits of creating a cash buffer in case of any unexpected expenses.

This exercise could also teach them the need to sacrifice buying something now in return for the ability to afford something better in the future.

3) Spend, save and give

In addition to setting budgets, getting your children or grandchildren used to the idea of prioritising their money for different uses early on is an important step for creating healthy financial habits in the long term.

Try getting your children or grandchildren to divide their money into three main categories – spend, save and give. This will help teach them that, while you may have a certain amount of money in the bank, you should always think about dividing it up for different uses rather than spending it all.

Spend – this should be an agreed portion of their money that they can spend on whatever they want, such as app purchases for games or a Disney Plus subscription.

Save – a second portion should be saved, either for something in particular, for longer-term savings or for a rainy day.

Give – encourage them to use a third portion of their money to help others. As a family you might have a favourite charity you support, or they may feel passionate about a cause.

4) Focus on savings

Working with your children or grandchildren towards longer-term saving targets can be really rewarding and teaches them that resisting the temptation to spend immediately can mean they can do much more with their money.

To help explain how saving and investing for the long term works – and how this can ultimately help generate more money - try offering a ‘bonus’ to their savings goals. For example, if they’re saving for a new game that costs £25, say you’ll give them £5 if they can save £20.

Opening a savings account, which is typically fee free, is another great way to introduce children to saving and explain concepts like earning interest. Many bank accounts are available from the age of 11 and offer most of the same features as adult accounts. A Stocks and Shares Junior ISA is another option if you’re happy to invest money and comfortable your grandchild can’t access the money before age 18.

Seasonal peaks like Christmas and birthdays, when children are often given money or vouchers as presents, are a good time to teach them about saving. For example, encouraging them to save at least a portion of what they get.

5) Financial safety is key

Protecting personal information is just as important a lesson as spending and saving. The chances are that your grandchildren are more tech-savvy than you. But there are still things you can do to ensure they’re protecting their identity online.

For example, make sure mum and dad have an eye on your grandchild’s social media accounts, and that they understand the potential dangers of sharing personal information anywhere online.

It might be worth spending time together to better understand the telltale signs of a scam, and which platforms are best for blocking potential scammers. With so many sophisticated scams going around, every day is a learning day – and by sharing stories they may be able to help protect you too.

No matter the age, learning how to be responsible with money is a valuable life lesson. The money-related activities you incorporate early on are sure to make a lasting impact on your children or grandchildren’s relationship with money for years to come.

So introduce them to money young, have regular conversations and keep an eye out for new ways to get them excited about saving!

Of course, being money-savvy isn’t only for the young…

ii is an abrdn business. abrdn is a global investment company that helps customers plan, save and invest for their future. Find out more about how abrdn can help you manage your wealth and book your free, no-obligation call today.

The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in. Information is based on abrdn’s understanding in March 2023.