How to teach children about money – your questions answered

Money skills are life skills. When children learn how to manage money early, they're better prepared for the challenges of adult life.

To coincide with Talk Money Week, we recently hosted a webinar with our charity partner, the Just Finance Foundation, on the topic of raising financially savvy children.

Our panel of experts covered:

• Why it’s important to normalise talking about money at a young age

• The best age to introduce financial concepts

• How to help children understand the true value of money

• Effective ways to introduce the concept of investing

We’ve summarised some of the responses from our question-and-answer session below.

The information and video included in this article isn't personal advice – if you're unsure, ask for financial advice. Investments go down as well as up in value, so your child could get back less than you put in.

Why is it important to talk to children about money at a young age? Is there a right age to start?

Sarah Wallace

Director, Just Finance Foundation

“Studies have shown children’s attitudes to money start to form by age 7.

They’re learning about money regardless of whether we’re actively teaching them. They absorb information around them – so if we aren’t teaching them intentionally good habits early on, they’ll likely be picking up information elsewhere.

We start teaching children about money from around the age of 4. While good financial habits are about more than just maths, as soon as they have a basic understanding of numbers, you can start to introduce the concept of money and the value it provides.

How do you normalise talking about money?

Nathan Long

Senior Analyst, Hargreaves Lansdown

“As someone with children of different ages, I think it can be useful to think about this in different ways. For example, introducing good habits with pocket money can be a useful way to teach younger children the concept of budgeting.

With varying levels of success, I’ve started talking to my teenage children about how the economy works more generally. We can link their own work at school to increased job opportunities in the future, the ability to earn money and the financial freedom this provides.

It’s not always easy but I’ve also tried using real-world events, like the Autumn Budget, to introduce ideas like taxation. This can help them to understand that decisions around how tax is collected and spent can directly impact us as a family – as well as society more broadly.

Are there any books you’d recommend for teaching children about money?

Maike Currie

Head of Content

“I’d recommend a book by my old colleague at The Financial Times, Claer Barrett, called What They Don’t Teach You About Money.

As parents, so much of our own relationship with money impacts our children. This is a really good book that covers seven habits for unlocking financial independence.

I’d also recommend a book I bought years ago, called ‘Money Doesn’t Grow On Trees: A Parent’s Guide to Raising Financially Responsible Children’ by Neale S. Godfrey. There are some really good practical tips – like the idea of defining ‘three jars’. One jar for spending. One jar for saving with a goal in mind (from ice creams to online games). One jar for sharing, to teach children the importance of giving.

Our partners at the Just Finance Foundation also provide a range of free resources, to be used either at home or in the classroom.

What’s the difference between a Junior ISA and a Junior Self-Invested Personal Pension (SIPP)? Which one is best?

James Corke

Head of Workplace Financial Wellbeing, Hargreaves Lansdown

“A Junior SIPP is a pension for children. This means there’s tax relief available for the child. Even non-earners can make a gross contribution of up to £3,600 each tax year, which works out as £2,880 net before tax relief is added on.

But the reality is that once money is paid into a Junior SIPP, it’s locked away for a long time. The earliest people can currently take money out of pensions is age 55 (rising to 57 from 2028).

Junior ISAs can be accessed by the child at the age of 18. So, savings built up here could be used to help with university fees or getting a foot on the housing ladder. But this is ultimately your child’s decision when they access the money at 18.

Both are long-term options, which mean they could allow children to benefit from the power of considerable investment compounding.

You don’t need to choose between one account or the other. If you have the spare money, you can contribute to both types of account if you choose.

Pension and tax rules can change and any benefits depend on your circumstances.

Watch the full webinar

Hear how to help the children in your life – whether daughters, sons, nieces, nephews, grandchildren - become money-wise and build a strong foundation for their financial future.

Hear why Jack chose the HL Junior ISA for his children

HL client, Jack, shares his experience of investing for his children. Hear what he thinks about the UK’s best value Junior Stocks and Shares ISA.