If you’ve ever experienced Christmas, birthdays or even a shopping trip with children, you’ll know that when it comes to toys, sweets or just treats, the more the merrier. To children, it’s often about quantity over quality. Understandable, as it’s hard for a child to appreciate what a price tag means, or how you may have had to save to do something fun.

No matter how well off you may be, teaching children the value of money is an important life lesson which will shape the way they spend and save in the future. It can be difficult, but you can use some, or all, of the ideas below to help teach your children about how money works, how it’s earned and the value of saving more than you spend.

1. Begin with the basics

This is especially true if your children are young. Teach them that size or quantity doesn’t always equal a larger value, by showing them the basic concepts of money and addition, the differences between coins, notes and values.

Provide a copper jar that your child can count on a weekly basis. After a few weeks, add some silver and finally larger sums. You could give them the option to swap money – for example, by exchanging ten 1p coins for a 10p piece, they can fit more money into their jar without compromising the value. Seeing the amount increase each week is exciting for children.

Ensure you play basic money related games with them, such as playing shop and teaching them what they can and can’t buy with the money they have, plus the concept of change.

As card payments and online shopping outsells the high street* it’s more important than ever to help your children get to grips with cash and the value it holds. A lot of what they see is purchases made without cash, which may appear to be free, making it harder to explain the value of goods you buy.

Once they are old enough, it is important to begin explaining how bank accounts, debit cards and credit cards work because it is likely they will use even less cash as they grow older., especially as mobile phones play an increasingly important role in contactless purchases. But they need to be able to link this back to physical money and its value in order to manage their money in real life.

2. Put them in control

Giving children responsibility for their own money, even small amounts, can help them learn to appreciate its value.

No matter how old your children are, allowing them to earn their money means they are likely to value it more. Whether it’s chores or completing tasks, explain to your children that all money is earned, that is why you need to work.

This responsibility is also linked to their spending, so allow them to buy what they want to with it. You can guide them, but allow them to make the final decision. If they want something, they need to buy it with their own money which means they’ll think twice about whether or not they really do want it.

It is better they do this now and learn that bad financial decisions have consequences, rather than when they’re older with larger sums of money.

 Introduce the idea of saving, spending and giving

If you give your children pocket money, ask them to split it up by putting some into a piggy bank or a savings account and donating some to a charity, or even buying a gift for a friend. Whatever is left over, they can choose to spend on themselves.

This idea allows you to teach children that money comes with some responsibilities, but that it’s still okay to spend some of your money and in fact, sometimes spending is necessary.

This will eventually turn into habit and hopefully something they carry forward through life.

3. Want vs. Need

It’s important to explain to children the difference between something they need and something they want, which will slowly allow them to form an idea of prioritising and budgeting.

Explain that it is okay to buy the things you want sometimes, as long as you are not sacrificing something you need.

Tell your children you are happy to buy the things they need, but they will have to use their pocket money for the things they want.

4. Involve your children in financial decisions

Saying no to something your child asks for without any explanation may appear to be a punishment. Involve your children in your decision and explain it to them.

If something is too expensive, explain that if you bought it you wouldn’t be able to buy something necessary tomorrow, or next week. You don’t need to go into too much detail, but explaining the way money works will help them to see why they aren’t always able to have what they want.

Use phrases such as ‘the money we have is for other things right now,’ rather than stating you can’t afford it, as this could cause a child to feel anxious or assume there may be money worries, feel guilty for asking, or that they can’t talk about money. You could tie it to something else that you have planned, such as explaining if you bought the object they want, you wouldn’t be able to take them to the cinema at the weekend, which will help them to understand budgeting.

Most importantly, allow your child to talk about money and ask questions, you don’t need to show them a bank statement to be open and honest. Talking about money as a private or ‘grown up’ matter is likely to teach children that it should be secretive and they may begin to keep spending habits from you as they grow up. Plus, if you can’t show them how to make a good budget, or explain a bank statement or receipt to them, it isn’t likely they will learn from anybody else.

Newcastle Building Society offers a range of savings accounts designed for children, whether you’re building a nest egg for their future or just looking for somewhere to put their pocket money. 

Find out more on our website www.newcastle.co.uk/savings/childrens-accounts.aspx or pop into your local branch.

*Source: http://www.telegraph.co.uk/business/2017/01/08/online-retail-booms-high-street-struggles/ (2017)