How to teach your children about money

When I was growing up, ‘no’ and ‘because’ were complete sentences: ‘Can I…?’ ‘No.’ ‘Why can’t I…?’ ‘Because.’ I can see now, as the mother of a nine-year-old, how labour-saving this was for grown-ups and parents and, in many ways, I mourn that loss. Or I would – if I had the energy.

But, in other ways, I can see that the modern way – explaining your reasoning and contextualising the decisions that have led the pair of you to this moment of – usually – denial, is a better way of doing things. Ignorance is never bliss for the one shrouded in it.

And we did grow up ignorant, didn’t we? The misapprehensions we laboured under about anything that would cause the slightest discomfort in our adults… Sex, of course, is the most obvious. I thought for years that you had to do it in a hospital, so clinical were the few scraps of information that I was given, along with subjects such as drugs, divorce and mental health problems. But money – having honest conversations about money, its uses, presence and absence – was a taboo just as strong, and yet somehow far stealthier.

We are more at ease talking about almost anything other than money. I know far more about my friends’ mental health issues and relationships than I do about what they earn and how they spend it.

How do we break this absurd cycle? We begin by talking to our children. We literally change the conversation. When they ask awkward questions about money, we can learn not to shy away – even if we initially grit our teeth and wish they would get back to asking where babies come from. Here are some of the common questions about money from the innocent fruit of our loins that we could answer in a more empowering way:

Q: Can I have more pocket money?

This can lead you anywhere. If the answer is no, you can’t afford it, say that. Don’t feel ashamed or guilty – these are feelings we want to uncouple from money so our children will learn to approach it as the neutral tool that it is.

“If you can’t afford more pocket money, say that. Don’t feel guilty or ashamed – these are feelings we want to uncouple from money.”

If you can afford more pocket money and are willing to shell out, take the chance to extract some labour from your offspring in return. Not just because it’s useful and pleasing – the sunlit uplands that will start to shimmer before your eyes the day your child first makes you a cup of tea without disaster are quite something – but because it introduces the vital concept of earning money, rather than it being handed to you.

Q: Is £100 a lot?

This is an opportunity to talk about all sorts of things: how much items cost, from sweets to houses, what you would use £100 for, what it would mean for families in different positions – anything to give your child the idea that money is never one, fixed thing. It exists in relation to lots of other things and they should all affect your decisions about it.

Q: Why don’t you just get more money out the cashpoint?

We forget how much children don’t know. So tell them. You work, you get paid. The money goes into the bank. You save some. You withdraw the rest when you need it. You buy food, pay for gas and electricity and the mortgage or rent – and then you can buy treats, if there’s anything left over.

The rules and priorities of life and budgeting should not be more opaque to children than the rules for behaving at school.

Q: Can I have a new game or pair of trainers?

Again, your personal circumstances will shape your approach. Most things can be obtained – if you save for them. Get children involved in this process. Are they prepared to save long and hard? Most children are prepared to try. Then you just sit back and let a beautiful lesson be learned without needing to do anything more.

“An appreciation of the potential of savings begins to awaken… This is a happy day.”

If they really want The Thing, they will persist; they’ll accumulate the money and swap it for something that they value equally. Or – and this is the wonderful part – they will decide it’s not worth it. The lustre of The Thing wears off, or they feel reluctant to convert their hard-saved cash into a mere single object. An appreciation of the plethora of potentialities represented by savings begins to awaken. This is a happy day.

Q: Why don’t we have a nicer car or house and go on fancy holidays?

Don’t be afraid to explain your priorities – whether they’re imposed by a lack of funds or actively decided. Tell your children what is possible, what you think is important and why and how you allocate spending to your family’s circumstances and nobody else’s.

Q: Why are some people poor?

Meet the spirit of naive enquiry as neutrally as you can. It’s another chance to destigmatise the subject. It can always be emphasised that however much or little money you have, being careful and conscious of where and how you spend it is always the way to get the most out of it.

Q: Are we poor?

Talk about what it means to be poor. Note what you have – hopefully that’s a home, warm clothes and food. Set yourself in a wider world than your child’s daily one. Explain the process of working for money, how you try not to waste it and anything else that feels pertinent. They should know that this is an active process, and there are skills to learn.

Q: Why don’t you just borrow lots of money?

Because one day, my sweet child, you have to pay it back. And, get this, with extra – to pay for the privilege of borrowing it! The concept of interest, or ‘expensive money’ as a friend’s perceptive 11-year-old put it, will blow a child’s mind, as it should. Let it stay blown. Only real money counts. Paid down, paid ahead, whatever – but real.

Q: What will happen if you lose your job?

The pandemic has made this question more real to us all and it is a chance to impress upon your child the importance of planning ahead and using the sunny days to repair the roof. Saved money is the tool that allows you to do that. Sensible allocation, living within your means and managing your money as well as you can is the way you spread the good bits of life over the difficult bits.

Q: Can I have my own account?

Yes, yes, a thousand times yes! The sooner they learn about what it feels like to look after and manage their money – to save it, plan it and, yes, even spend it – the better.

Q: Can I spend my savings?

No. Probably.

Q: Why not?

This is your chance to talk about the different reasons for saving. Let’s assume that you let them keep some of their pocket money for small things and that it’s the tucked-away remainder that sits somewhere, and perhaps provide ways of letting children manage their money thoughtfully.  Adults divide their money into essentials and longer term goals, and you can give your child the equivalent: an account for future needs (a car or university), coveted items (video games and monogrammed football boots), and immediate needs (sweets). It makes saving seem more fun and flexible, as it should be.

Q: Can you lend me the money for X and I’ll pay you back later?

If you’re amenable, make sure you fix a timetable for repayment – and stick to it. Just as we teach children what foods are bad for them, we need to teach them that debt needs to be repaid. If you’re really mean, and by that I mean strong, charge them interest. But, ideally, say no. Getting into debt for anything smaller than a house is almost never worth it.

Q: Why are you so strict about spending and saving?

Here’s how I bill saving to my kid – it gives me power. Children love the idea of power. I tell him I think of myself as a general in charge of money troops. I send some to pay this bill and others to pay that bill. A battalion holes itself up in the bank. I’m not sure I’m using the right military terms, but he gets the idea. It makes budgeting fun and conveys the sense of control it gives you over life. I want him to have this.

Q: Why do YouTubers earn so much and can I start my own channel?

It’s good for children, and us all, to remember that what we see are the success stories – in any field. For every high-flying singer, actor, YouTuber and start-up billionaire, there are thousands of people who have not made it or are just chugging along. Try to give a sense of perspective without disheartening them. Ambition is good. Realistic ambition is better.

Q: If spending is bad, how come you do it?

This is what happens when, as I did, you go too far emphasising the importance of saving. Now, whenever my child sees another scented candle or lipstick in the house, I am hauled over the coals. So, don’t forget to include the fact that money is also there to enable you to buy the stuff you want, as well as the stuff you need. We work hard for our money and make it work hard for us so we are safe, fed and so the house can smell nice and we have a lip colour to match every outfit and mood.

Author Lucy Mangan spoke to HyperJar, the 100 per cent free money management app for adults and kids that helps you see, plan and set goals for everyday spending.

Photograph: Getty Images