By this age, research shows that children’s attitudes about money are already well developed. This makes it important to build good money habits as early as possible.
Parents and carers play a key role in preparing children to manage their money well as adults. There are direct links between children’s financial behaviour and what their parents do.
You don’t have to manage money perfectly teach your children about it. Even if you are struggling with money, you can still do basic things at home and at the shops to start a conversation about money, and to involve children in spending decisions. This will go a long way in helping children learn to manage their money well as children and as they grow into adults.
If you find it hard to talk about money, as many people do, use these ideas and activities on how to talk with your children about money to help them avoid difficulties in the future.
How does talking about money affect children?
Some parents are concerned about exposing their children to money at an early age. However, our research also shows that children who do better with money as adults are:
- exposed to conversations about money
- given money on a regular basis (it doesn’t matter how much), and
- given responsibility for spending and saving.
Do children learn about money at school?
There are children who receive financial education in school as part of the secondary school national curriculum in England or the primary and secondary curriculum in Scotland, Wales and Northern Ireland. However, from our research, four in ten children say they received no financial education in school.
What can children understand about money at this age?
Some of the things children can understand include:
- ways of paying that don’t involve cash e.g. debit cards, credit cards, online payments
- the importance of keeping track of spending and saving
- lending and borrowing
- there are jobs that are paid and jobs that are unpaid.
Children at this age are more independent. They can save for things and make more choices around how they spend money. They can understand that when they spend money, the money is gone and that they need to save more to buy something else.
Around the house
There are lots of things you can do at home to talk about money in day-to-day life. For example, if your child is starting to get regular pocket money, talk about how they will keep it safe. Will they keep it in a jar or in a bank account? How will they carry it when they go out?
Children can have their own savings goals. Ask them what they want to save up for. Ask them and help them think about how long will it take to save up for their goal, and how can they keep track of their saving.
Think together about the difference between things that your family needs, and things that you all want.
At this age, you can start to teach your children more about the way money works. Explain that when you save money in the bank, you earn money for keeping it there. This is called interest.
Try this activity: Put together a list of things that you might need or want on a desert island, such as basic food, water, matches, rope, toys, books, phone, sweets etc. Ask your child to choose seven things (there will be no more coming!) to take with them to the island to survive. You can explain that even though you don’t live on a desert island, you do have to make choices about what you buy.
Out and about
You can even use simple trips to start a conversation about money. When you go shopping, let children help you to compare prices. Look at brand name items and own brand products. Which costs more? Why? How can you save money?
Talk about adverts - on billboards, around the shops and on TV or the computer. Are things always as good as they look?
Keep talking about the many different ways to save money. Can your children borrow a DVD from the library or from a friend rather than buying it, or make ice lollies rather than buying them?
Peer pressure and pester power
Children often want what their friends have. It’s natural for them to ask you to buy things. That doesn’t mean that you have to buy everything they want. Use moments like this as an opportunity to talk about branding, peer pressure and money. Why do they want certain things? What does it mean to have the same things their friends have?
Don’t worry if your child makes a mistake and spends all their money. This is a really good way to learn. If they buy a toy and realise they don’t have money for something else, they’ll know how to save and choose next time.
The power of pocket money
Pocket money is a great way to help children learn how to manage money and give them the opportunity to save up for things. How much they get isn’t important, what matters is that they practice with their own money.
There are lots of ways to handle pocket money, for example:
1. Give children weekly pocket money to buy their own sweets, toys and other treats: Let them save up for what they want, and give toys or treats only at special times such as birthdays or holidays. Some parents say this helps to stop children from pestering and teaches them to budget and save.
2. Children earn their pocket money by doing chores around the house: For some parents the idea of earning all your money sends a good message. Others think children should help out because they are part of the family, not for money.
3. Give children weekly pocket money and let them earn extra money by doing jobs around the house: Some parents like this method because their children get regular money to manage, but can earn extra if they want. They say that children help out more, but parents have to think about what they can afford to give. Again, some parents do not like this approach because they want children to help around the house because they are part of the family.
Before you decide whether you want to give pocket money or have children earn it, you are going to do think about what your children will have to buy from their money. Will you buy them extra toys, sweets, magazines or do they pay for it all? Remember needs change as they get older. What about going out? Phone credit? Thinking this through will help you to budget and your children to learn what they need to save for.
The three jar method
Pocket money provides a good opportunity to talk about saving for longer-term goals like university or a car, and about giving money to charity. You may want to suggest that your children set aside a small amount each week to go into the bank or credit union, or give something to charity. Some families have three jars—one to spend and save for treats, one to save for long term, and one for giving.
What if I can’t give pocket money?
What if you are not able to give them regular pocket money, or don’t want to? Have a look at your budget. You may find that you’re already giving them money to buy things, so you won’t be any worse off setting a weekly amount instead. Remember, it doesn’t need to be much.
If you can’t or don’t want to give your children pocket money, you could talk to your children about this. Think about other ways they can learn the value of money. Are there ways they can earn money? Will they have the opportunity to handle their own money so they can learn? Children are great at coming up with ideas, so it’s worth spending time talking with them about this.
Download ideas and activities for children age 3-11 in the Talk, Learn, Do guide.