Money doesn’t grow on trees – teaching your children the value of money

30th May 2018

Financial literacy isn’t a skill that we’re born with. Learning how to manage money effectively requires acquiring a few important life lessons that parents can pass on to their children from a relatively young age.



It makes sense to encourage children to handle cash as soon as possible to help them recognise its value, and to plan how to save some of their pocket money, so that they can save up to buy a new toy or book with their own money. After all, good things come to those who wait, teaching delayed gratification is a great lesson. It’s important that they realise you work to earn money and that it simply doesn’t pop out of the wall at the cash point.



It’s important for kids to understand what budgeting means to teach responsibility with money. If you demonstrate responsible buying by creating a budget before you go shopping, comparing prices, using money saving vouchers and curbing impulse purchases, you can lead by example.

Older children need to know how to handle their money before they leave home. It can be an important life lesson for older children to learn how credit cards work, and how interest and charges are calculated, and how they can mount up if the balance isn’t cleared regularly.

When it comes to borrowing money, they need to know that there are many different types of loan available and that it’s important to understand how to compare charges and interest rates.

It’s also worth explaining to teenagers the value of having a good credit score, and how this can improve their financial chances when the time comes to enter into big financial transactions like taking out their first mortgage.



Junior Individual Savings Accounts (JISAs) are a good way for children to learn about the benefits of saving money for the future. The advantage of a JISA is that they are tax free and once the account has been opened by the parent or guardian, anyone can make contributions, including grandparents, friends and family. The savings limit for the 2018-19 tax year is £4,260.

Children gain control of their JISA at age 16, but the money cannot be withdrawn until they are 18. At that point, the account is automatically rolled over into an adult ISA, a valuable facility for those who want to continue saving or investing tax-efficiently.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

The above is purely for information purposes only and does not constitute advice.