FAQ about kids and money
Answers to frequently asked questions from parents
1. "Top money lesson to teach kids?"
Don't spend all your money
The top lesson to teach kids is to not spend all their money. Kids will quickly learn that money is for spending but we need to proactively teach them about saving money.
If we don’t teach kids to save then they will develop a strong spending habit which will be hard to break as they grow up and can lead to them overspending and going into debt (like so many adults today).
Saving a small amount each time they receive money will allow them to build their wealth. Those that save as kids are a lot more likely to save as adults and avoid many of the money mistakes that adults make.
If money is like a 'seed', investing is the act of planting the seed so it grows. Most people just store their seeds and never see them grow.
2. "How to teach kids to save?"
If money is like a 'seed', saving is the act of planting the seed so it grows.
Think of money like seeds
The easiest way is to get your kids to think of money like seeds. Their job is to plant (save) as many seeds as possible so they grow into a forest over time.
Also, get your kids to set mini-goals with their money. This could be saving up 4 weeks' worth of pocket money to buy something they really want. The key message is that they have to wait rather than being about to buy what they want straight away.
Teaching your kids to be patient with money is a superpower which will lead them to become financially healthy as they grow up.
3. "What age should I start giving pocket money?"
As young as 4 years old!
ids will form many of their money habits by the age of 7, so starting young makes sure you help them form good money habits.
It’s the money habits that they form that will determine their future financial wellbeing.
To see which money habits they should be forming, please see here
4. "How much pocket money should I give my kids?"
If you want a forest, you need to make sure you don't have just one tree, as a tree can die.
Increase by age and responsibility
Pocket money is a way to transfer spending and saving responsibilities to your kids.
Start small and say they will have to buy their own toys between their birthday and Christmas. They can then learn to save their pocket for extra toys. So decide what toys you feel they should be buying for their age and give them enough so they can afford it after, say, 6 weeks if they save.
As they get older, give them more pocket money but make it clear you won't be paying for certain things anymore (they have to use their pocket money). This could be trips to the cinema with their friends. Or new clothes if they are teenagers.
By the time they are 16, they should be in control of most of their discretionary spending.
5. "How to I teach my kids to budget?"
A budget is a like a moat around your savings!
Budgeting is so important as it helps kids learn to delay their gratification. Start by getting them to budget their time. For example, you can limit them to a certain amount of screen time per day or week. They can decide when to use that but once it’s been used it’s gone. Whilst it can be hard for you when they reach their limit, it’s super important that you stick to it otherwise they learn that there is no downside to not budgeting.
Next is to get them to save up for something they want. If you give them pocket money (allowance), then they should set a goal and this will help them budget how much they can spend now versus save towards this goal.
To help visualise budgeting, I tell my daughters that a budget is like putting a moat around your savings. If you don’t have a budget then your savings are likely to be attacked by companies trying to get your money.
6. "Should I open a savings account for my kids?"
For a tree to grow, just leave it alone!
Yes! But an investment account is better.
Yes. This will allow them to see their money grow as they save.
If your kids are young (under 12 years old), then you should consider setting up an investment account for them. As they have many years before they become adults, this money has plenty of time to grow, even if the stock market falls in the short term.
For more information on investing, please see here