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How to Talk to Your Kids About Money, with Helen Driver

Millie Ngai-Lenoir

Date: Nov 5, 2020

Financial education has been a part of the compulsory national curriculum in England since 2014. However, in 2017, a study released by Young Money, titled “The Ticking Time Bomb of Generation Debt” was critical of many secondary schools and said that education about money has stalled.

Also, according to the London Institute of Banking and Finance, “after five years of financial education being in the national curriculum, it’s not adding up for young people. 69% of students still regularly worry about money and 82% want to learn more about money in school.”  

As parents or guardians, how can we start the conversation of money at home and introduce the concept of finances to kids?

In this episode of The Wallet, Helen Driver, an ex-fund manager who spent 20 years in the City and founder of Moneyready, an interactive financial education platform for children and parents, discusses the importance of formal financial education. Her mission is to ensure the next generation is ready to face their financial futures with confidence. 

1. Building healthy relationships with money

A report by researchers at the University of Cambridge commissioned by the United Kingdom’s Money Advice Service revealed that money habits are formed by the age of 7, and that children as young as 3 years old can understand financial concepts such as saving and spending. Given the impressionability of children at such a young age when it comes to finance, it is crucial that parents and guardians impart healthy attitudes towards money that will ultimately enable the next generation to face their financial futures with confidence and stability.

2. Leading by example

It is not a new concept that parents have great influence on their children's lives. The way parents and guardians think, behave and feel around the topic of money will resonate with their children. For example, if money is a source of tension in your household, it is likely that the money scripts your children carry through their adult life will be permeated with a high degree of anxiety. It is also important to remember that actions speak louder than words. Children’s attitudes towards money are more likely to be based on observations of their parent’s behaviour around money rather than on what their parents try to communicate to them verbally about money. For example, a lesson delivered by a parent on the importance of understanding the difference between a want and a need is all well and good but if that parent then frequently uses shopping trips as a leisure activity, that lesson is unlikely to be reinforced. 

In addition, research suggests that one third of parents lie about money to their children. Whilst there may be very good intentions behind this statistic, further studies suggest that this is not conducive to the development of positive financial wellbeing. In adulthood, these children may subconsciously believe that lying about money is not only acceptable, but that it can be used as a convenient tool to hide away from financial problems. Hence, if a child asks a financial question, you should do your best to answer it in a way that will help them understand, but if you do not feel comfortable answering, be honest and say you don’t want to discuss the topic further at that particular point in time. 

3. Priming the right money mindsets

Helen explains that when seeking to develop healthy attitudes to money in your children, it is useful to use the analogy of a car:

  • Conceptualise money as a car to be used to take you on a journey from point A to point B 

  • Your car allows you to reach your destination at point B in the same way that your money allows you to reach your goals

  • If you want to reach your destination (or goals) it is necessary to take control of the wheel (or your finances) 

  • How new and shiny your car is (or how rich you are) is irrelevant: the important thing here is that you have your hands on the wheel (have an appreciation for basic financial concepts and, from this, feel in control of your money)

  • In this sense, the car analogy is excellent in establishing the distinction between want and need, which is critical to teach children at a young age: you do not need to upgrade your car in order to reach point B although you may want a new model for the high spec 

  • Simple budgeting, which will enable you to understand your income streams and outgoings, is an excellent way to begin grasping control 

This analogy is helpful for priming the right money mindset because it looks at money in a matter-of-fact way and removes the emotion surrounding the topic, instead opening financial concepts up for discussion. 

In addition, it highlights the importance of teaching your children about money from a young age. Being in control of your finances is an essential life skill. Whether you are poor or rich, money touches everyone’s lives - it is not something you can opt out from. 

With formal financial education lacking in schools, it is vital that parents aim to impart a healthy mindset when it comes to money and teach their children the financial concepts that will help them to feel in control of their finances as they move into adulthood. 

4. Introducing simple financial concepts 

A common question that parents approach Helen with is, “what age is the right age to teach my child about money”. Her response is that the parents themselves are best placed to know what their own children are capable of understanding, although, in general, children’s attitudes and experiences with money are picked up at a very young age. Teaching children about money does not need to be done in a complex, overt way. At the earliest stages of development, simple financial concepts can be learned through standard storytelling. For example, the theme of delayed gratification permeates throughout Charlie and the Chocolate Factory, as the greedy children in the narrative ultimately lose out while Charlie, the poorest of them all, wins the prize through his patience and endeavor. Fables such as The Tortoise and the Hare also impart essential money lessons in a subtle way, with the idea that being slow and steady in your finances, for example when investing, will be of benefit in the long run. 

As children get older, it is important to keep lessons on the topic of finance relevant. This will enable children to experience money on a practical level and help them to recall money lessons more readily in the future. When giving more specific lessons on finance, for example if you would like to teach your children the distinction between ‘good’ debt and ‘bad’ debt, it is important to keep them engaged. This will require to teach finance in bite size chunks, keeping the shorter attention span of children in mind. For example, Moneyready uses a combination of short 90 second videos to teach basic financial concepts and then leverages gamification to consolidate these concepts through interactive quizzes and certificates. Eventually, for parents with teenage children, it is important to keep frank when talking about money and to openly discuss finances with them.

5. Letting your children make mistakes 

Perhaps counterintuitively, one of the best ways to teach children about money is by letting them make their own mistakes. This is where pocket money can really come into its own. Although, it is important to ensure that you have the financial capacity to provide pocket money as a parent because one of the best things you can do as a parent, Helen explains, is to “keep your own financial house in order”. If you are in a fortunate enough position to give your children pocket money, it will help your child to learn about money through practice. For instance, if you encourage your child to split their pocket money into three categories, ‘spending’, ‘saving’ and ‘giving’, they will be able to experience first hand the good feeling that comes from buying a toy they wanted from their savings. This will also teach them the concept of opportunity cost: if they have blown all their savings on one toy, they forgo the alternative of being able to buy lots of smaller toys in the immediate future. Such mistakes are far less costly at a young age than later on in life when the stakes are much higher.

I would highly recommend listening to this episode of The Wallet with Emilie Bellet and Helen Driver for a deeper dive into the methods that parents can leverage to introduce financial concepts (such as delayed gratification, budgeting and saving); helpful tools to use for financial education purposes; and how to appropriately build up a young person’s knowledge and money skills over time. For those without children, this episode remains highly relevant as it sheds light on how attitudes to money are formed in early life and provides you with some basic but life-changing financial tips! 

You can listen (55 min) and subscribe here:

Resources: 

You can follow and connect with Helen at: 

Helen shared some great resources in this episode. All the links are below: