4 valuable financial lessons your children will be glad you taught them

When did you start learning about money? Perhaps it was in school, at home, or – seemingly more likely – in adulthood.

According to UK parliament data, just 33% of children and young people recall learning about money in school and finding it useful, while only 24% received financial education at home.

Therefore, you may not be surprised to discover that a survey of 4,000 young adults found just 41% are considered financially literate.

Teaching children about finances can be invaluable, with strong financial literacy often fostering good money management skills and positive attitudes towards money.

Read on to explore how you can start helping your child develop their financial literacy and prepare for a financially stable future.

Lesson 1: Money is earned through work

Encouraging children to earn an allowance could help them understand the value of money, providing a solid foundation for managing their finances in the future.

Eastspring Investments suggests getting children started with a chores-based allowance around age three to six. Of course, the tasks you choose will depend on the age and capabilities of your child, but some examples include:

• Making their bed
• Tidying their toys away
• Clearing the dinner table
• Watering the plants.

When your child is old enough, encouraging them to get a part-time job can help further reinforce their appreciation for the value of money. By teaching them that they have to work for money and it won’t always be handed to them, you can help to stand them in good stead for managing their finances in adulthood.

Lesson 2: Money has limits and can stretch further through budgeting and saving

According to the Money & Pensions Service, 21% of UK adults rarely or never save.

Encouraging your child to budget, save, and spend their pocket money wisely can help them develop good habits to support them in adult life. By teaching them to save up for higher-value items, rather than making small impulse purchases, you can demonstrate the potential reward of saving.

As mentioned, when your child is young, you might opt to give them cash and encourage them to save with a piggy bank so they can see their coins and notes building up. Then, as they get older and more confident with money, you may choose to open a bank account to help them more easily budget, save, and spend.

Additionally, for larger, long-term savings, you might consider opening a Junior ISA (JISA) for them. These accounts allow you to tax-efficiently save up to £9,000 a year for your child as of 2025/26, with funds becoming accessible to them when they turn 18. They can start managing their own account from age 16, but you could use the account to teach them about saving and interest from an earlier age.

As well as saving, JISAs can also be used to help children get started with investing – more on this later.

Lesson 3: Credit and debt should be treated with caution and managed wisely

Often, young adults need to balance earning with studying, and paying rent and bills with enjoying their youth. As a result, the opportunity to borrow additional funds can seem appealing.

In fact, the Money & Pensions Service found that nearly 4 in 10 of those aged 18 to 24 years were in need of debt advice, compared to 18% across all age groups.

Before your child turns 18, it may be worth warning them about the risks of getting into debt. In particular, you may wish to educate them about the following debt financing options:

• Credit cards
• Overdrafts
• Loans
• Buy now, pay later (BNPL)

Many young adults are unaware of the potential consequences of borrowing. In particular, Credit Connect reports that 46% of young people are unaware that BNPL can lead to debt, fees for missed payments, or referral to a debt collector.

Of course, sometimes borrowing is necessary – so be wary of creating an air of shame around debt. Instead, you might educate your child about the ramifications of missing payments and accruing interest charges and teach them how to use and manage debt wisely.

Lesson 4: Investing could help grow wealth, but there are risks

By supporting your children to understand and get started with investing early, you could help provide a solid financial foundation for their future.

According to MoneyWeek, someone investing £5,000 a year in the FTSE 100 over the past 40 years would now have grown their £200,000 investment to over £878,000. Meanwhile, someone who started 20 years later but invested £10,000 a year would only have seen their £200,000 grow to just over £388,000.

So, getting started with investing at a younger age could be beneficial, with Equifax suggesting that children may be ready to start learning about investing between the ages of 9 and 12. You might consider the following to help them take advantage of the opportunity to grow long-term wealth:

• Teaching them the fundamentals of how investing works
• Discussing the different asset classes available
• Explaining concepts such as compound returns
• Sharing your own experiences.

Crucially, it’s also important to explain the inherent risks involved, particularly that positive returns are not guaranteed and they could even end up losing money.

Additionally, if you’re planning to open a JISA for your child, you might consider the stocks and shares options. These can help introduce your child to investing, while setting money aside for their future.

As mentioned, you can invest up to £9,000 a year (2025/26) with a JISA. And, because any income or returns generated in a Stocks and Shares JISA typically won’t be liable for Capital Gains Tax (CGT), Income Tax, or Dividend Tax, they are also highly tax-efficient.

Get in touch

If you’re looking for support with your family’s financial planning, email Marnel.Stafford@fosterdenovo.com or call 07305 970959 or 0207 469 2800 to find out more about how I can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individual savers and investors only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.