How to Teach Effective Financial Literacy Skills to Your Kids

(Photo : Bermix Studio on Unsplash)

Financial literacy is a hugely vital aspect of education for children. However, the topic is rarely, if ever, taught in schools.

Today's generation of kids has far more access to financial transactions, ranging from in-game purchases to app-based online stores and marketplaces and even advertising on social media platforms specifically designed to capture children's attention.

While parental controls are widely available, these tend to be less effective. Statista figures show that 23.3% rely on restricted settings, whereas 50.7% recognize that education is a more viable and long-standing approach.

Why Is Financial Literacy Such a Big Deal for School-Aged Children?

We've mentioned the touchpoints and access to buying credits, tokens, and merchandise online—but it isn't for these generally lower-value transactions that kids most need financial literacy know-how.

Parents have far greater control when children are small and can, for example, unlink their credit cards from a device or add password or biometric protections to stop kids from getting to a checkout without permission.

The problem is when those kids become teens and young adults and have the freedom to apply for credit and store cards. They will normally be expected to get a job and eventually have to manage a household budget and ensure they pay rent and utility bills on time.

Tips for Parents on Teaching Financial Literacy Abilities to Younger Kids

Like every life skill—cooking, cleaning, or communicating your needs—the best time to begin is when kids are little. They might not grasp the scope or importance of the topic, but ingrained learning is never forgotten. There is a great post available for free here that discusses which age groups should be taught financial literacy skills.

Introducing the value for money is a perfect start. For example, you might:

• Allocate a weekly set allowance and help your child decide what they want to do with that money. Would it be better to have a bag of sweets today or a highly desired toy at the end of the month?

• Invite them into discussions about budgets and saving. Can they help you work out which dishwasher powder in the supermarket is cheaper or compare the cost of a multipack in the shop compared to the same number of individual items?

• Explain costs in relative terms. It's common for a child to want something now—but can you provide something that adds context to the price? For instance, a carton of juice is a small cost and something you don't need to consider much. However, the cost of a new bike is a much bigger expense and a purchase that requires thought and research.

Adults who are careful with money and get the basics are also kids who learned the difference between spending and saving, investing and credit—and they have those baseline skills that make all the difference when making those decisions independently.

Helping Teens and Young Adults Manage Their Finances

Several credit lenders provide online borrowing calculators that can be a great free resource to show an older child what the true cost of borrowing looks like. These tools, like Wonga's above, allow you to put in a borrowing amount and the time you need to pay it back, generating an immediate calculation.

Working through this process can help children see:

• What borrowing actually costs—in cash figures.

• How much more expensive a purchase would be if they used credit rather than saving.

• The time they would need to allocate repaying a line of credit.

Rather than telling a child 'no' or simply expecting them to understand their finances and why credit isn't always a great solution, this hands-on approach gives them the space to ask questions, explore potential scenarios, and ask for help—without any risk that they will make unwise choices on the assumption that one way or another they will be able to pay back whatever they choose to borrow.