The importance of financial education for kids

Teaching kids about money early in life can really help to create good financial habits before they become financially independent.

Starting from an early age means that they can learn how to manage money effectively and put it into practice as much as possible in an age-appropriate way. This also means that in the future they can be confident and make informed decisions.

Good financial health can start early and will help to set your children up for the future. Learning to have a healthy relationship with money can help to avoid future stress and worry, and support mental health, even in children.

Whether you’re the parent, grandparent, or guardian, there are things you can do that will make a difference. If you're not sure how to teach your child the value of money, here are a few ways you could start.

Even young children can learn about budgeting on a small scale. The next time you're in the supermarket or shop, for example, show them that for the same price, you could choose several small 'pick and mix' sweets, or save up for a larger chocolate bar.

We’ve actually got our own Budget Calculator tool that might help you do this in a more interactive way. You could either use your circumstances as an example or do a few different scenarios to show how different factors will impact a budget. You may also find it helpful to look into budgeting and money management apps, such as Snoop.

Knowing how to teach your child the value of money might sound scary. But if they can grasp the example with sweets we just mentioned, teaching the value of money in real life might just mean pointing out how much things cost when you're doing your weekly shop.

When you're doing a weekly shop, show them how many apples you can buy with a 50p piece, or how many pounds they'd need to save up to buy a toy. Putting even a small amount of money in context can help to teach your child the value of money in the real world.

An important life lesson for children is understanding the difference between wants and needs. The reason this is particularly relevant when it comes to financial education is because having this knowledge will help them make informed decisions about their spending in the future.

Giving your child the opportunity to earn their own money and letting them spend this money however they wish will help them begin to understand the value of money. There are various ways you could encourage your child to earn money, such as doing household jobs, babysitting, or selling unwanted items.

The money lessons that your kids could learn from this include understanding that, if they want to buy an item that they can’t yet afford, they’ll have to save up and continue earning to be able to do so. Alternatively, if they spend it all then they’ll have to wait until they’ve earned more to be able to make other purchases.

With the rise of technology, it’s important for adults to be open and honest about digital money with children so that they understand how it works and how to stay safe and avoid fraud.

Be sure to try talk through the different types of digital money experiences they might come across, including:

• Banking apps
• Making in-app purchases
• Buying things online
• Using gift cards, phones, cards, or smartwatches to make payments

It’s important that they understand the value of digital money and that it isn’t just a physical thing.

Here are some other simple financial tips and suggestions that we think would be helpful to know at a young age.

Money is important, and it's normal and healthy to worry about money a little bit. But if money issues become overwhelming and you struggle with financial stress, it's also important to understand that you have options and that there are organisations who can help you. You can find out more about who these organisations are in our debt advice and support guide.

At Lowell, we work with some fantastic independent charities and organisations who are there to help. We think it's important that everyone knows from a young age that help is available and that you don't have to worry or struggle alone.

Understanding interest - and how it works when you borrow money or take our credit - is key to good financial health. That's why we think it's important to learn about it when you're young and developing new financial habits that could last well into adulthood.

Learning how interest is added to debt could help you to avoid becoming overwhelmed with expensive debts, with interest piling up if you aren't able to make repayments in a timely fashion.

When you're young, it's easy to just accept that the given price is the only price. But it's important to understand that you can always shop around for the best deals to save money. Whether it's home insurance, credit card rates or even just a pricey item that you want to buy, it's always worth doing research before making an investment.

Teaching kids about money whilst they’re still young can help to encourage good financial habits from the start. At Lowell, we believe that being open and honest about money and debt can help to remove the stigma around struggling with finances and start conversations about how we can help others.

If you’re concerned about your situations, there are lots of trusted organisations who can offer you expert advice tailored to your situation, including StepChange and Mind. We’ve also got a separate guide on debt and mental health which discusses the relationship between the two in more detail.

For more helpful information on a range of finance and debt-related topics, take a look at our Debt Guidance hub.