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Teaching Money Management Skills

Schools are very good at teaching academic subjects, the arts, and sports, but some of the more essential skills in life are still somewhat neglected. Money management is one such subject, and although the topic will be touched upon during a child’s education, it won’t be studied as comprehensively as many would wish. Being able to look after your finances is one of the most important requirements of adult life, yet many young people leave high school or college still fairly clueless on the subject. Inevitably this leads to problems, and rates of debt among the young are worryingly high. Parents are seen as the people who should be taking care of this aspect of their children’s education, but how is this best achieved?

Understanding money

Children don’t grow up instinctively knowing how to handle money matters, and they need to be taught the basic skills from an early age if they are to appreciate the importance of managing their own finances. There are several ways parents can encourage this:

  • Make your children responsible for their own budget: As soon as your kids are old enough to be able to understand the math involved, open them an account for savings and start getting them used to the idea of paying for their own treats from their pot of money. There are several bank and savings accounts schemes for children available, including schemes where the child is given a bank card to use. Christmas and birthday money can be put into the account and anything they earn from doing odd jobs for you. As your children get older, you could start putting their allowance money into their account and show them how to start budgeting for their own clothes and other necessities before using any surplus to buy games or other rewards.
  • You could encourage your children to find a job that will give them some pocket money. Paper rounds are the old favorite, but there could be other roles that suit your child better. Check out the legislation for children and make sure you both understand what is permissible and what isn’t. Saturday jobs in retail stores, helping out at farms and animal parks, washing cars, mowing lawns; there are all sorts of odd jobs kids can do. This will help teach them the value of money when they have had to work to earn it rather than having it handed to them. They will appreciate that money only comes from working hard, and they will consider the effort involved in earning money when it comes to spending it.


There are all sorts of temptations around for young people, and many find it hard to resist the allure of spending their cash on non-essentials. Having the latest cool gear and designer brands, and going out partying and having fun are the kinds of things kids always want to do when they’re setting out in life. None of that comes cheap though, and then there are the illicit joys of alcohol that can make their cash disappear overnight. Many young people turn to credit to help them out of a hole and then find they can’t cope with repayments. This can lead to difficulties coping with life, and debts that affect them for years to come. As a parent, you need to show them how credit can be used wisely and what to think about when they’re considering credit. Go through the various options available on a reputable site like Bonsai Finance so you can be sure they understand there are a variety of choices and that sensible borrowing can be a useful tool. Explain what the interest rates mean and how interest is calculated and do some sample calculations to show them how much they would be paying for loans and credit. It’s been demonstrated that children tend to favor immediate rewards even when they could have more if they waited a little longer. It can be hard to get them to understand that they are better off waiting until they can afford something non-essential rather than putting themselves in debt just to have it now. Larger purchases such as a car for traveling to work could quite justifiably be financed by a loan because it’s something that will enable them to earn and therefore is a requirement rather than a luxury. It’s just a case of explaining to them the difference between sensible borrowing and running up bad debt.


Creating a personal budget is a sensible thing for everyone, but it can be tricky for young people to know what to include and how to calculate their expenses. There are tools available online that can help them create a budget and websites that can help them estimate monthly living costs. This is also a good time to make sure they understand the way the tax system works and how this will affect their earnings. Explain to them the importance of including every item they spend money on and making savings that will help cover them if they have any major expenses. You can also show them how to use their budget to identify areas that are costing a lot of money and where savings could potentially be made, and how to use the budget to forecast where they will be financially in the future.


They may not be in a position to make investments in the early years, but it’s worth explaining the basics of investing at this stage so they can consider whether it’s right for them when they do have some spare cash. The world of investment has such a dizzying array of different options that seem inexplicable to young people, and they often find it hard to understand and indeed pretty boring! An introduction to, and explanation of, the way key investment strategies and markets work will make it seem less intimidating and more relevant and will give them the insight to consider taking this route in the future.

Helping children to get to grips with finances will make their lives run more smoothly, help them achieve their goals, and enable them to avoid the debt trap, so start teaching them about money management as soon as you can.