Financial experts are issuing a clear call to parents: teaching children about money at home is just as vital as any school curriculum. With the UK government confirming that financial literacy will become a mandatory part of the national curriculum in England for both primary and secondary schools from September 2028, the focus on monetary education is intensifying. However, specialists argue that classroom learning alone is insufficient.
The Critical Home Environment
Research consistently shows that children who receive financial education at school are more likely to save regularly, maintain bank accounts, and feel confident managing their finances. In the rest of the UK, financial education is typically integrated into subjects like mathematics and social studies. Yet, experts emphasise that home-based lessons are foundational. "Money habits are already formed by the age of seven," explains Louise Hill, founder of the prepaid debit card and financial education app GoHenry. "It's so important to let kids get hands-on with money and build up their skills at home from an early age."
Rajan Lakhani, a father-of-two and head of money at the personal finance app Plum, reinforces this view. "Teaching kids about the value of money as soon as possible is very important," he states. "The habits, attitudes and understanding they develop from a young age can have a big influence on how they approach money matters in adulthood."
Five Essential Money Lessons for Children
1. Understanding the Value of Money
Young children can grasp monetary value through engaging role-play activities, such as setting up a pretend shop. Lakhani recommends displaying toys and fake groceries, using coins labelled with different values, and taking turns as shopkeeper and customer. This method helps children see that groceries and other items are not free, teaching them to avoid overspending while improving basic arithmetic skills. In an era dominated by contactless payments and online banking, it is harder for kids to visualise how money works. Lakhani advises explaining debit or credit card transactions and, when possible, letting children witness cash purchases to demystify the process.
2. Distinguishing Between Needs and Wants
This is highlighted as one of the most crucial money skills. Hill suggests weaving lessons into daily life, such as allowing children to lead the weekly food shop with a set budget. This exercise helps them identify essentials and understand why extra treats or new toys are not always feasible. If a child desires something special, it becomes an opportunity to start a savings pot. Lakhani proposes making lists of needs versus wants to facilitate discussions about prioritisation and financial decision-making.
3. The Benefits of Saving
Understanding the difference between needs and wants naturally leads to lessons on saving. For younger children, practical examples are key. Lakhani shares an anecdote about his eldest daughter, who received birthday money and initially wanted to spend it impulsively. By explaining how saving could grow her money, similar to how parents save, she learned delayed gratification. Her £15 eventually became £20, enabling her to purchase a truly desired toy, thus linking saving to goal-setting. Hill recommends adding fun elements, like recreating a 'fakeaway' meal at home instead of dining out or having a home movie night rather than going to the cinema, to demonstrate how small savings accumulate toward larger goals.
4. The Connection Between Hard Work and Earning
Pocket money serves as a powerful tool for teaching children about earning and budgeting. Hill notes, "It isn't about how much you give, it's just about being consistent, and that's what helps kids build up good money habits." Linking pocket money to chores, such as tidying their bedroom, helps children understand that money must be earned and does not magically appear via cards, online transactions, or ATMs. This instills a sense of responsibility and the correlation between effort and financial reward.
5. How to Keep Money Safe
Initially, a piggy bank provides a tangible, safe place for children to store their money, offering parents a chance to discuss the importance of security. Lakhani stresses that piggy banks or savings jars should be transparent, allowing both parent and child to see the money grow. This visibility enables positive reinforcement, as parents can congratulate children on successfully building their savings. As children mature and accumulate more money, transitioning to a bank account becomes appropriate, furthering their financial education.
Conclusion: A Collaborative Approach
While the upcoming mandatory financial literacy curriculum in English schools marks a significant step forward, experts unanimously agree that parental involvement at home is indispensable. By incorporating these five lessons into everyday life, parents can equip their children with the skills and mindset needed for lifelong financial competence. The combination of formal education and practical, home-based experiences ensures that the next generation is better prepared to navigate the complexities of personal finance.
