Finance experts suggest ways to teach children good money habits over the summer

The summer holidays can be a “perfect time” for parents to teach children about budgeting and spending, finance experts have said.

Introducing children and young people to good money habits from a young age can help to build financial confidence and set them up for life, they added.

They made the suggestions ahead of My Money Week (June 9-13), a campaign and activity week which aims to encourage children and young people to learn about money matters.

Chris Henderson, save and pay director at Tesco Bank, said: “It’s so important to teach children about money, and how to manage it, from a young age.

“The skills and knowledge that are gained, which we carry with us into adulthood, can really impact how we live our lives and our financial wellbeing.”

He suggested making everyday spending a “fun challenge,” adding that the summer holidays “can be the perfect time to talk about budgeting and spending”.

Mr Henderson added: “It might be a quick trip to the shops to pick up dinner or something bigger, like a day out. Let your children take charge of the budget and see how they would spend the money – you could even set them a challenge, like planning a day out.”

With many transactions taking place digitally rather than with physical cash, Mr Henderson also suggested showing young people “what it looks like when you get paid, the money landing in your bank account, and then the things that you have to pay for – like water, electricity or housing costs.

“For older children, you can start introducing them to things like national insurance and your pension.”

He also suggested introducing the idea of savings with a “wishlist” of items children want, inviting them to consider how much money they would need to save and how they might reach their savings goals faster.

Mr Henderson added: “Not only will this help them save, they’ll also value their purchases more and only spend on items they really need, rather than the first thing that catches their attention.”

Brian Byrnes, head of personal finance at financial app Moneybox, suggested that some parents could consider opening a junior Isa.

He said: “By the time your child turns 18, a junior Isa is automatically transferred into an adult Isa, allowing them to decide on how they wish to spend, or invest their hard-earned savings.”

Mr Byrnes added that if parents are concerned about how their children will spend the Isa money once they reach adulthood: “You could put a small amount into a junior Isa and the rest of your savings into a different account earmarked for your children’s future.”

As with adult Isas, junior Isas have tax advantages and the money held in them is ringfenced from the taxman for as long as it remains in its Isa “wrapper”.

Mr Byrnes also suggested talking openly about money with children, adding: “Talking about any money you have put aside for your children with them is a fantastic way to include them in your plans and educate them on savings and investing.”

Susan Hope, a retirement expert at Scottish Widows, highlighted recent research it had commissioned which indicated that more than two-fifths (44%) of adults doubt they will ever achieve financial independence, “with confidence in making everyday financial decisions a driver of this”.

She suggested that going through payslips with young people could help them to understand concepts such as tax and national insurance (NI).

Ms Hope added: “Let your children see how you budget, compare prices, or plan for your weekly spending. Involving them in decisions, like choosing between two activities based on cost, teaches practical skills they’ll use for life and should instil money confidence.”

As children get older, she suggested talking to them about “important topics like saving into a pension and what this means. A pension is something they will likely encounter for the first time when they start full-time work and we know that engaging early gives people the best opportunity to build a healthy pot for later on in life.”