Supporting children with financial management - Ruth McGuire
In days gone by, it was fairly easy to teach children about money management. You could quite literally lay out pounds, pennies and notes on a table and show children how they add up and gradually decrease as a result of spending. However, as our world becomes increasingly cashless and financial transactions become increasingly computerised, teaching children how to manage money has become more of a challenge.
Many financial transactions that used to take place using cash now take place using ATMs, the internet, mobile phones and contactless card scanners. A 2019 report from the British Retail Consortium confirms that a quiet revolution is taking place. It found that ‘more than two thirds of consumers prefer card for making payments (69%), of which the highest proportion prefer contactless (40%). This compares with only 28% of consumers who prefer cash.’
The decline of local bank branches and the increasing number of online bank accounts has added to the invisibility of cash in the world we inhabit. Currently, as a result of Covid and concerns about infection control, many more shops than previously ask customers to pay for purchases using ‘contactless cards.’ The invisible nature of so many money transactions makes it essential that children develop financial literacy skills at the earliest opportunity.
Budgeting and spending
An easy and obvious place to start to teach pre-school children about money management is by blending it with maths or numeracy teaching. Use coins and the various denominations of notes to help children develop their counting skills and their understanding of coins, notes and their value. Coins and notes can be separated into different piles to help children recognise the value of different coins. Children can learn simple addition, multiplication and value from seeing how piles of coins such as 10p, 20p and 50p pieces and piles of notes add up, multiply or divide to make up different amounts of money.
As they begin to understand the value of different coins and even notes, children can learn to link value to cost. This is the first step to teaching them how to budget. For example, a child could be encouraged to use a website or printed catalogue to find the price of a favourite toy, computer, game or book. The ‘lesson’ could also include a demonstration of what the cost of an item looks like in coins and pounds. Parents, teachers and other adults can teach children how to budget by involving them in discussions about the family food budget or some other weekly budget. At nursery or school, teachers can use shopping games or play activities to help children develop their financial literacy skills. In real or simulated shopping trips, children can use ‘money’ to buy items. This will help them to understand the process of exchanging money for goods.
Another way to teach children about the value of money is by giving them a set amount of money to spend when out shopping or in a ‘play shop.’ For example, a child could be given a maximum of three pounds to spend on any item of their choice. This helps a child to understand that there are limits to what money can buy and they learn in a small way, the importance of spending within a budget. Another activity that could be used by teachers or parents and suggested by www.moneyadvice.org.uk is as follows:
- Talk to your child about how their favourite TV characters treat money.
- How much of what the characters do costs money, even if they’re not shown handing it over?
- Which of them are good role models in their attitude towards money and which aren’t?
Itemised paper bills such as utility bills are a tangible way of helping children understand the cost of using utilities at home such as gas, electricity and water. Bills can also be used to help children understand the concept of debt and what it means to owe money to a company. Bank statements are another useful document that can be used to help children see what financial transactions look like on paper and understand the difference between a ‘credit’ and a ‘debit.’ Shopping receipts are also an effective tool for teaching children about financial transactions. Children should be taught how to read receipts and learn how items, their costs, date and time of purchases are recorded on receipts. A simple exercise is to ask a child pay for an item and collect a receipt that they then keep as a record of their purchase. Receipts can also be used to show children the difference in receipts where cash has been exchanged and other receipts where a debit or credit card has been used to make a payment.
Earning and learning
The good old-fashioned piggy bank is a good way to teach children how to save. It reinforces learning about what money looks like in reality and also teaches children responsibility for managing their own money. They can be encouraged to make regular ‘cash deposits’ of any amount in their piggy banks. For example, children can ‘deposit’ pocket money, ‘birthday’ or ‘Christmas’ money in their piggy bank. A good way of incentivising a child to save is by giving them a target or goal to aim for. This could be something specific that a child wants or could be set up as a game that they can win if they reach the target. Depending on the age of the child, a ‘bonus’ system could be used to help a child understand how banks ‘reward’ customers with interest for saving their money for set periods of time. The natural progression from saving in a ‘piggy bank’ is saving in a bank account. As a child progresses in age and development, teachers and parents can help children understand how banks and building societies help people to save and manage their money.
The ‘new normal’
As we continue to live with Covid, children will at some level experience the impact of the economic downturn. This could be because their parents become unemployed or have reduced income or it could be that shops in the local area close down. The more financially literate children are, even at a young age, the better equipped they will be for the future – whatever that looks like.
Resources and activities
For financial education ideas and activities to use with children visit:
The Financial Education Planning Framework produced by the Young Enterprise https://www.young-enterprise.org.uk/ suggests different learning outcomes for different ages and the framework can be used to plan progression in financial education.
For general tips on teaching children about money see
Ruth McGuire is an Education Inspector with nearly 15 years of inspection experience. She has taught in both further and higher education. She is also a well-established education and training consultant, writer and freelance journalist. She is a Governor of an outstanding sixth form college and also holds board roles within the NHS.