The three Rs of reading, writing and arithmetic that children learn in school could soon be joined by a fourth: repaying your mortgage.
From September 2028 financial education and literacy, including budgeting, debt, interest, mortgages and pensions, will be taught at primary schools. The move has been widely welcomed amid worries that children are leaving school without the skills to manage their money.
Only 7 per cent of 9,000 polled by the trading platform Interactive Investor said they had good financial lessons at school, with 70 per cent saying they didn’t get any.
But parents don’t need to wait until 2028. Children can develop an understanding of money, including budgeting and saving, from the age of six, according to Tim Jay from the University of Nottingham, a former secondary school maths teacher.
Any lessons obviously have to be realistic: there is no point trying to teach a very young child about investment risk when your biggest money danger is them swallowing a pound coin. So we asked some personal finance experts for the lessons every child needs to know.
Lesson one: Pocket money doesn’t last for ever
Experts recommend teaching children about budgeting by giving them regular pocket money that they can spend or save as they see fit.
NatWest said the proportion of parents regularly paying children on its Rooster Money pocket money app, which has 350,000 users aged 6-17, fell to 27.4 per cent in the year to February, down 1.8 percentage points on the year before. The average amount given was £3.85 a week.
Jay said: “We know that regular pocket money is really good for learning about money. It doesn’t seem to matter how much, but regularity is important. And children need to be given some autonomy in how they manage their money.”
Another tactic is to put children in charge of the household budget for a day out. Kate Steere from the comparison site Finder did this with her sons, Josh, nine, and Luke, seven, and said it taught them some valuable lessons.
She said: “Too many times we had been out for the day, and a quick caffeine hit for the parents had turned into a £20 blow to my finances after the children begged for their own treats. So we agreed they would have a budget of £100 to spend on a day out.
“This had to cover travel, the activity, lunch and snacks — and whatever they didn’t spend they could keep. This meant they were super-motivated to keep the costs low so they could keep as much money for themselves.”
• How to talk to your children about money (at any age)
While parents used to give cash to save in piggy banks, now pocket money apps that give children their own debit cards are everywhere. As well as Rooster Money, there is GoHenry, Nimbl, Starling Bank’s Kite and Monzo’s under-16s account. Children can spend their pocket money using the card and or add it to a savings pots, and parents get to see what they are up to.
Many of these accounts have fees (GoHenry starts at £3.99 a month and Nimbl’s annual charge works out at £2.67 a month) but Kite and Monzo are free, as is Rooster Money for NatWest customers, so it’s important to decide if it is worth paying for the added features.
A cheaper option could be a linked bank card; Starling has a connected card where any spending comes out of a designated pot you set up in the app, capped at £200. Barclays lets you set up four extra cards and limit how much can be spent on them.
Jay said these accounts could be a good introduction to online banking and “can be really good for children’s learning, as they give them a really easy way of tracking their money and spending”.
• I pay my son £40 a month to load the dishwasher — is that so wrong?
Video games can also be a source of financial education. Your children may already be into Roblox, Fortnite or EA Sports FC, and they have virtual currencies, which are used to buy and sell items in the game. This could help to teach children about money, value and scarcity — without boring them to death.
The currencies are usually earned in the game, but can also be bought with real money via a linked debit card, which, can, however, be dangerous. If you enable that facility, make sure your children know that it’s real money, and it’s their card that is linked. Set a spending cap.
Lesson two: Compound interest is a powerful thing
Albert Einstein supposedly described compound interest as “the eighth wonder of the world”. Put simply it is the return earned on earlier returns and it can have a powerful snowball effect. An annual interest rate of 4 per cent will double your money in 18 years.
Maike Curry from the pensions company PensionBee said it was one of the most essential concepts any child should learn. She said: “If they can grasp how compound interest works, that effect of earning interest on interest, then they will see that the most powerful ingredient here is time.”
Lesson three: Risk isn’t always bad
It’s worth teaching children that some risks are worth taking. Many savers play it safe by keeping large amounts of money in cash, rather than investing it in the stock market, where it could grow much quicker, but also runs the risk of losing value. The government thinks that this habit is making us poorer in the long run.
The Barclays Equity Gilt study, which has tracked UK asset returns since 1899, found that over 10, 20 and 50-year periods through history, investing in shares has almost always outperformed cash, government and corporate bonds once inflation is taken into account.
Abby Banks from the financial advice firm The Private Office said: “In finance, risk is a fundamental part of growth. There are different types. For example, investment risk, the chance that the value of an investment might go down as well as up, and inflation risk, which is that money loses its spending power over time. Teaching children to assess these risks encourages them to think critically, weigh up options and understand that not all financial decisions come with guaranteed outcomes, but that doesn’t mean they’re not worth taking.”
A way to show this in practice could be by investing on your child’s behalf. Parents can set up a Junior Isa, into which £9,000 can be paid each year, with any investment gains or interest being tax-free. Your child can manage the account from 16, and withdraw the money from 18, with the choice to transfer it to an adult Isa.
The investment platform Hargreaves Lansdown said that the average Junior Isa that matured in the 2024-25 tax year was worth £19,357 and that most holders kept their money invested.
“It’s much easier to show a child how to be an investor if they are one, than it is to try to get them to consider it as an abstract notion,” said Sarah Coles from Hargreaves Lansdown.
• Antonia Medlicott: Money lessons in schools is a winner, but we could go further
Lesson four: Interest works both ways
If you are borrowing money, compound interest can work against you. Experts said that it was key for children to understand that borrowing was rarely free, and that you will end up repaying far more than you borrow.
Few people understand what an annual percentage rate (APR) means — it is the rate that lenders have to give so consumers can compare the cost of borrowing, and reflects the total cost over a year, including fees and interest, as a percentage of what you borrow. Generally speaking, the lower the APR, the cheaper the cost of borrowing. Loans that are secured against something, such as a mortgage on a house or car finance — are usually cheaper than unsecured borrowing such as credit cards.
Vikki Brownridge from the debt charity StepChange said: “Many people may rely on credit cards or loans at some point in their lives, and credit can be useful to spread the cost of a large expense. It would be enormously beneficial to introduce the concepts and terms around credit, such as APRs, interest rates and credit limits, early on, particularly to emphasise that using credit isn’t necessarily something to avoid at all costs, but that managing it wisely is key to financial stability.”
Lesson five: If something sounds too good to be true, it probably is
Unfortunately you’re never too young to be scammed. Santander said that between July and September £33,000 was stolen from fraud victims under the age of 18, mostly while they were shopping online.
Some 71 per cent of 7 to 17-year-olds buy things online, 67 per cent without adult supervision, according to a survey by the government’s Money and Pensions Service advice site.
The mantra that if something sounds too good to be true, it probably is will stand children in good stead throughout their life. If an Xbox Series X games console that normally costs £500 is on sale for £85, the chances are it’s a scam or not the console you think it is. The same goes for adverts that put pressure ono you to make decisions quickly.
These scams often happen through social media, so teach your children the importance of verifying anything they read, rather than taking a stranger’s word as gospel.
‘Why I show the children my payslip’
Caroline Raines has not gone as far taxing her children’s pocket money, but one lesson she is keen to impart is the fact that money has to be earned — and you don’t get to keep all of it. Raines, 51, and her partner Marc Sumner, 50, from Lincolnshire, have six children between them aged 10 to 20.
Caroline Raines and her partner, Marc Sumner
CAROLINE RAINES
They all have their own bank accounts, some with GoHenry or Monzo, and the four middle children get £10 a week pocket money for new clothes, make-up or going out with friends, in a bid to teach them how to budget. The eldest, who is at university training to be a doctor, gets £250 a month towards her living expenses and ten-year-old is given pocket money on an ad hoc basis for now.
About a year ago Raines, who works for the Compare the Market comparison website, began showing her daughters, aged 16 and 15, her monthly payslip so that she could talk to them about tax, pension contributions and how to budget each month.
She said: “They don’t completely understand everything, but it’s about pointing out the concept that you don’t keep everything you earn, and that money comes from somewhere.”