By seven and eight, many children are ready to learn about managing money. So it’s a good time to show them how to make good decisions.
How does talking about money help?
Having conversations about money builds children’s confidence in the subject and helps to develop their financial skills.
Research shows that adults who do better with money:
- had conversations about money as children
- were given money regularly, such as pocket money or payment for chores
- had responsibility for spending and saving from an early age.
How you talk to children about money when they’re this young helps to make sure they are able to make good decisions when they’re older.
And you don’t have to be a financial expert or manage your own money perfectly to be able to give them good advice.
Did you know?
Our research shows that only four in ten children say they were taught about money and finance in school
What many seven and eight-year-olds understand about money
By the ages of seven or eight, many children understand:
- the difference between needs and wants
- ways of paying that don’t involve cash, such as debit and credit cards, and online payments
- the importance of keeping track of spending and saving
- lending and borrowing.
You can now build on this understanding by helping them to make good decisions. For example:
- They may be getting more independent with their money and deciding on what they spend it on, but will need help to develop healthy money habits.
- They might save up for things they really want. But they won’t always be happy with their decisions. They may need help to learn from the choices they regret.
Pocket money and encouraging children to save
How much pocket money you give isn’t important. Giving children even the smallest amount of money regularly is a great way to help them learn how to manage money.
This could be pocket money or paying them for chores they do around the house, or both.
This means they can save and spend their own money rather than yours! This helps them to practise learning to save up for the things they really want.
“We have a chores list the children can earn money from, and each chore has a price. We don’t make them do the chores but if they want pocket money each week the amount they get depends on what they do around the house. It gets paid into their bank accounts and they can spend it on what they want.” – Sabrina
Using three jars for money
Some people encourage children to have three jars for their money:
- One to spend, and maybe save for treats (such as games).
- One to save for long-term goals, like an Xbox.
- One for giving – maybe to a charity or cause the child cares about.
Talking about money
Until now, children tend to learn about money by watching what you do with it. Around now is a good time to get them more involved.
There are plenty of opportunities to talk about money, both at home and when you’re out and about.
Looking after money. If children get pocket money, talk about how they’ll keep it safe. Will they keep it in a piggy bank at home or in a bank account? How will they carry it when they go out?
Saving. It’s good for children to want things to save for. Help them think about how long it will take to save for it. Explain that when they put money in the bank, they can earn interest. If they have a bank account, go online with them to show them. You can discuss the importance of passwords and keeping their online banking details safe.
Needs versus wants. Together, you could make a list or draw a picture of what people need and what they want. Use it to talk about the difference between the two.
Online buying. Perhaps let them buy something online with your supervision. Explain how important it is that you’re around when they do this while they’re this young. Talk about how buying online can be so easy that you can lose track of how much you’re spending. And how important it is to take time out to think before buying online.
It’s worth making sure that your payment details are password protected – just in case youngsters try to buy things online when you’re not looking
Out and about
Trips out are great ways to have conversations with children about money.
At the shops:
- Ask them to help you compare prices. Look at brand name items and own brand products. Talk about which ones cost more and why. And how you can save money.
- Talk about adverts and encourage them to explain how they’re encouraging people to buy them by making the product look more appealing. Discuss whether things arealways as good as they look. Have they ever bought something that wasn’t as good as they expected? How did this make them feel?
- Talk about alternatives to buying that can save money. For example, can they borrow a DVD from the library or from a friend instead of buying it? Or make ice lollies rather than buying them?
At the beach:
- You can take a picnic and games to the beach – and have all you need for a fun day out that doesn’t cost money.
- See who can come up with the most ideas for free activities. And talk about how free days like this helps you to save.
The desert island game
This fun game teaches the importance of making good money choices:
- Put together a list of things you might need or want on a desert island. For example, food, water, matches, rope, toys, games, books, phone, etc.
- Ask the child to choose seven of these (there won’t be any more coming!) to take with them to the island to survive.
- Choose your own seven items – and then compare the choices you both made.
- Give them the opportunity to change their choices – and talk about why they’ve made these changes.
- Explain that even though you don’t live on a desert island, you still have to make choices about what you buy.
Developing willpower and learning to wait
A big reason children (and adults) can struggle to save money is they find it hard to wait for things they want. If they want something, they want it now.
At the age of seven or eight, children are still developing willpower and the ability to delay having something now (such as buying sweets) for something better later on if they save (such as a new computer game).
The marshmallow test – with money
The marshmallow test is a famous psychological study where children can choose to have one marshmallow now or two if they can wait 15 minutes.
The adult leaves the room, leaving the child with one marshmallow. Will they eat it or hold out for that extra one in 15 minutes’ time?
Try this using any treat.
Explain how money is similar and that waiting can help money grow.
Managing peer pressure
Seven to eight-year-olds tend to want what their friends have. This is because they’re reaching an age where peer pressure is playing an important role in their lives.
This is why it’s a good time to teach children self-discipline and help them start building their self-identity.
When they seem to want things because their friends have them, perhaps ask them questions that make them think more about their decisions. For example:
- what does it mean to have the same things as their friends?
- why do they want the same things as their friends?
- what do they have that their friends don’t have?
They’re bound to make bad decisions along the way. For example, saving for something they want then caving in to peer pressure and spending their money on the same new toy their friend has and then regretting it.
This is a great way to learn about making careful decisions when it comes to money.
More money-management activities
All children develop at different times. For example, some seven to eight-year-olds will respond far better to the activities we recommend in our How to talk to five and six-year-olds about money or How to talk to nine to 12-year-olds about money guides. Simply choose the ones you feel are the most suitable.
For more ideas for all age groups, download our Talk, Learn, Do guideopens in new window (also available in Welsh).
Did you find this guide helpful?
Thank you for your feedback