Raising Financially Savvy Kids: Practical Money Skills and Problem Solving Strategies

Money is a sadly essential part of our lives, and it’s never too early to start learning about its value and how to manage it via practical money skills. As a parent or carer, you’ll likely want your children to grow up to be financially savvy and responsible adults. But how do you get them there?

Well, the answer is simple: by actively teaching them practical money skills and problem-solving strategies from an early age. These skills are essential for navigating the complex financial landscape we live in, and they can have a profound impact on your child’s future success.

Whilst this article will mainly focus on worldwide research, according to a recent survey from the UK, only 57% of parents feel or carers feel confident or like it’s their responsibility to teach their children about money management. Many parents are unsure of how to start, what to teach, and when to begin – often leaving it to the teachers and practitioners in schools and nurseries for fear of doing the “wrong thing”.

In this article, we’ll dive into why teaching children about money matters and the benefits of practical money skills for kids is so vital. We’ll also cover the importance of problem-solving skills for children and how they tie into financial education. By the end of this article, you’ll have a simple understanding of manageable, small steps to raise financially savvy kids who are equipped to handle whatever financial challenges come their way.

Why Teaching Children about Money Matters

Teaching children about money is not only important in the short term but also has long-term implications for their financial well-being. Studies show that children who receive financial stimulation and encounter money-related problem-solving early on are more likely to make better financial decisions later in life. Financial literacy for kids and children worldwide is becoming more critical, especially given the current economic climate, where money management is more important than ever. If children can’t develop the basics early, it sets them off on the wrong foot for having to solve issues with debt, investment, and budgeting for the essentials from their monthly wage once working.

Waiting until later in life to teach children about money can, with no pun intended, be a costly mistake. A study by the National Financial Educators Council found that those who received financial education before the age of 18 were more likely to save money, pay off their credit cards, and invest in their futures and retirement. On the other hand, those who did not receive financial education were more likely to make poor financial decisions, such as carrying high credit card balances, and not saving for retirement.

Financial literacy rates among children and teens worldwide are alarmingly low. In a survey conducted by the Organisation for Economic Co-operation and Development (OECD), only 12% of 15-year-olds worldwide demonstrated a baseline level of financial literacy. The survey also found that girls and children from lower socio-economic backgrounds had lower financial literacy rates. These statistics highlight the need for more financial education for kids and children worldwide to empower them to make sound financial decisions throughout their lives.

Whilst you’d expect the education system to take on some of this strain, the nature of the education systems around the world and their governmental expectations means it’s not always at the forefront of lessons taught. This is why teaching kids about money is essential for all parties involved to play their part – without parents, educators, and policymakers worldwide on the same page,  financial literacy will never increase. If you’re reading this article, you’re most likely looking for ways to provide financial education early on so your children can develop good financial habits that will serve them well throughout their lives. Let’s move on to see if we can unpick practical money skills a little more…

Benefits of Practical Money Skills for Kids:

Teaching children practical money skills has numerous benefits that can positively impact their daily lives and future success. So let’s first look at the key rationales for developing these skills.

Develop responsible spending habits: By learning how to manage money effectively, children can develop responsible spending habits that will stay with them for life. They’ll be better equipped to make wise financial decisions, avoid unnecessary debt, and save for their future.

Boost independence and confidence: Financial literacy empowers children to take control of their own finances and become more independent. It also instils confidence and self-assurance, as they learn how to navigate the financial world with ease and an awareness of the dangers, pitfalls and risks.

Strengthen problem-solving skills: Managing money requires strong problem-solving skills, which can be developed through practical money lessons. Children can learn how to identify financial challenges and come up with effective solutions, which can be applied to other areas of their lives as well.

Improve academic performance: Studies have shown that children who receive financial education tend to perform better academically, perform better in standardised testing and access better colleges and universities. This is because, in a similar way to developing a love of reading early in life leads to written competence, practical money skills require mathematical and critical thinking. This, in turn, can improve overall cognitive abilities.

Increase future earning potential: Financially literate individuals tend to have higher earning potential over their lifetime. By teaching children practical money skills, you’re setting them up for financial success in the long run.

In the UK, there are several real-life examples of how practical money skills have helped children become more responsible, independent, and confident. For instance, schools across the UK have finally started to incorporate financial education into their curriculum (budgeting, stocks and shares, investing), resulting in children developing a better understanding of money management. As a result, they are better equipped to make informed financial decisions, such as saving for university or buying a car. Additionally, some UK banks have started offering savings accounts, cards and fintech apps specifically designed for children, which can help teach them the importance of saving money from an early age.

Overall, teaching children practical money skills can have a profound impact on their present and future success, making it an essential aspect of their education.

Photo: Click the image above to learn more about GoHenry and the parent-monitored debit cards that can be used to nurture financial accountability in children.

Building Strong Financial Foundations

Building a strong financial foundation is essential for children to become financially savvy adults. By laying a solid financial foundation from a young age, children can learn how to manage money, budget, and save effectively. This not only helps them develop good financial habits but also sets them up for future success.

A strong financial foundation consists of several key elements. Firstly, children need to understand the value of money, how it works, and how to use it responsibly. Secondly, they need to learn how to budget and manage their finances effectively. This includes tracking income and expenses, setting financial goals, and prioritising spending. Finally, children need to understand the importance of saving money and how to do it effectively. This includes opening a savings account, setting savings goals, and understanding the concept of interest. Once they’ve mastered this, they should be ready to look into wider financial lifestyle ethics, such as the FIRE movement (Financial Independence, Retire Early).

As a parent, there are several tips and strategies you can use to help your children build a strong financial foundation. Firstly, start teaching them about money management from a young age. This could include playing games that teach them about budgeting and saving or giving them a weekly allowance or pocket money to manage. Secondly, lead by example and practice good financial habits yourself. Children learn by watching and emulating their parents, so if you’re financially responsible, they’re more likely to be too. For example, if your visiting a supermarket,  make a decision to model to your children not to give in to peer pressure spending to buy the latest over-priced item advertised on TV. Finally, use real-life examples to teach financial lessons. So, again when grocery shopping, explain how you make choices based on price and quality, or when paying bills, show them how to budget for monthly expenses.

By building a strong financial foundation from a young age, children can learn how to manage money effectively, budget, and save for their future. As a parent or carer, you play a critical role in teaching them these important skills and setting them up for future financial success.

Start Young: Age-Appropriate Money Lessons for Kids:

Teaching children about money should start as early as possible to ensure they develop good financial habits from a young age. By tailoring the activities to their age group, children can learn about money management in a fun and engaging way. Here are some age-appropriate money lessons and activities for children from preschool and nursery to high school.

For preschoolers, basic concepts like the value of money, counting, and simple transactions are key. Activities like playing with toy cash registers, pretend shopping, and counting coins can be fun and engaging for this age group. An affordable way into this that is sustainable and avoids a massive outlay on toys is considering a toy subscription box for a fraction of the RRP of toys and games. Whirli is a great example of a company offering educational toys for younger children at great savings.

For primary school children, more complex concepts like budgeting, saving, and earning money can be introduced. Activities like opening a savings account, starting a piggy bank, and earning money for household chores can help them understand the value of money and how to manage it responsibly in a world where inflation can really impact what you choose to buy.

As children grow into their teenage years, more advanced concepts like credit, debt, and investing via free stocks and shares can be introduced. Activities like setting financial goals, developing a budget, and drafting a small business plan can help them learn important life skills that will serve them well into adulthood. By starting young and building on previous knowledge, children can develop strong money management skills that will benefit them for years to come.

Encouraging Saving Habits: Strategies and Tips

Saving money is a critical aspect of financial competence, and it is never too early to start. Encouraging children to save money from a young age can help them develop good financial habits that will benefit them throughout their lives. Saving money can also help children learn about delayed gratification and the importance of planning for the future. Parents can teach children about saving money by setting an example, giving them an allowance or pocket money, and helping them set savings goals.

One of the best ways to encourage saving habits is to create a savings plan with your child. This plan should include a specific savings goal and a timeline for achieving that goal. For example, if your child wants to buy a new toy or video game, you can help them create a plan to save up for it. You can also set up a savings account for your child and show them how to track their progress towards their goal. Other strategies for encouraging saving habits include incentivising saving by offering to match a portion of the money saved or providing small rewards for meeting savings milestones. One example of this is encouraging saving for the future in a JISA by “match funding” your child, i.e. – whatever they save, you match. The bonus of using an ISA is the compound interest will boost this further for their future.

Setting Financial Goals: Teaching Children to Plan Ahead

As a parent, you can help your child set financial goals by first discussing their wants and needs. Talk about what they would like to purchase in the short-term and long-term, and help them prioritise their goals. Encourage them to take stock of their material possessions and what truly matters to them. Once you’ve identified the goals, break them down into smaller, more manageable steps. For example, if your child wants to save up for a new video game, you can help them set a savings goal and then help them figure out how much they need to save each week to reach that goal. If they have possessions, toys and clothes that are no longer fitting, needed, or in use, maybe they could sell these at car boots, garage sales or online via eBay, Facebook marketplace or Gumtree (with your support if younger).

Setting and achieving financial goals can help children develop important life skills, such as patience, discipline, and persistence. By learning to plan ahead and make smart decisions, children can become more confident and independent in managing their finances. Additionally, achieving financial goals can give children a sense of accomplishment and motivation to continue making smart financial decisions in the future. Using sites like Gumtree to resell also gives children an understanding of what others value something at and encourages the concept of bartering.

Photo: It doesn’t have to be complex mathematics. Simply talking about money matters each day can help young minds to develop an awareness of value, needs/wants, and the mechanics of managing funds. Image courtesy Unsplash – Free Usage licence.

Developing Money Management Skills

Money management skills are essential for children to learn as they prepare for the future. By developing these skills, children can learn how to manage their money and make informed financial decisions. Parents can help their children develop money management skills by teaching them the value of money, how to create a budget, and how to make saving a habit. Encouraging children to track their spending, teaching them how to use a bank account, and involving them in family financial decisions are also effective strategies for developing money management skills. When children develop these skills, they are better prepared to make sound financial decisions as they grow older.

Budgeting Basics: How to Teach Kids to Budget

Budgeting is a fundamental money management skill that children need to develop to make informed financial decisions. By teaching children how to budget, parents can help them understand the importance of managing money responsibly. Parents can start by introducing the concept of budgeting and explaining its importance to children. They can then work with their children to create a budget that fits their income and expenses.

To teach children how to budget, parents and carers can encourage them to track their expenses and income regularly. This can be done using a simple notebook or a budgeting app for kids that is easy to use. Parents can also involve children in the budgeting process by discussing their expenses and income and helping them make informed decisions about spending and saving. By teaching children how to budget, parents can help them develop lifelong skills that can help them make better financial decisions.

There are many budgeting apps available for families that can make tracking expenses and income even easier for children. For example, GoHenry is a fintech app designed for kids that allows parents to set up a digital account and manage their children’s pocket money. Children can use the app to track their spending and savings, set savings goals, and learn about budgeting and financial responsibility in a fun and engaging way.

Other budgeting apps for kids and families include RoosterMoney, which allows parents to set tasks and goals for children to earn money and track their savings, and Spriggy, which offers a prepaid debit card for kids and a parent app to manage the account and monitor spending. By using these apps, parents can make budgeting more interactive and enjoyable for their children, and help them develop a strong financial foundation that will serve them well throughout their lives.

Managing Money Responsibly: Strategies for Parents

Parents play a crucial role in teaching children about responsible money management. By modelling responsible financial behaviour, parents can help their children develop good money habits. Some strategies for parents to consider include talking openly about money, creating a family budget, and involving children in financial decision-making for the home. Even something as simple as being eco-monitors to make sure money’s not being wasted on TVs, lights and other electrical products being left on. Additionally, parents can teach children about the importance of paying bills on time, taking meter readings, avoiding debt, and making informed financial decisions. By teaching children these important money management skills, parents can help their children build a strong foundation for financial success in the future.

Instilling Good Spending Habits: Tips and Tricks for Kids

Savvy fintech apps like GoHenry can be a useful tool to help children develop good spending habits. These apps allow parents to set spending limits, track their child’s spending, and even reward them for good financial behaviour. By giving children a sense of independence and responsibility over their own finances, these apps can help instil good spending habits from a young age. Additionally, they can provide a safe and controlled environment for children to practice making financial decisions and learn from their mistakes, setting them up for success in the future.

Problem Solving Strategies for Kids

Problem solving skills are essential for children to develop as they learn how to manage money. It’s important for children to understand how to tackle problems that they may encounter while making financial decisions, whether it’s figuring out how to save money for a new toy or understanding the concept of interest. These skills will help them become more confident and independent as they grow older.

One way to develop problem solving skills is to provide children with opportunities to play games and use toys that encourage problem solving. For example, building blocks, puzzles, and board games can all help children develop their cognitive skills, which can support their future financial competence. When playing these games with your child, encourage them to think critically and to come up with creative solutions to problems. This will help them develop the skills they need to make sound financial decisions in the future. Coding and debugging toys, games and activities also help to develop problem solving skills and resilience.

Photo: The use of coding and debugging toys and games can help develop resilience. Image courtesy of Unsplash Free Usage Licence

Another strategy for teaching problem solving skills is to encourage children to think about the consequences of their financial decisions. For example, if your child wants to spend their allowance on a toy, you can talk to them about how that might impact their ability to save for something else they want in the future. Talk to them about prioritising wants and needs in lists. This can help them develop the ability to think through the consequences of their decisions and make informed choices. By using these tools, children can learn how to budget, save, and spend their money wisely, while also developing their problem solving skills.

Photo: Courtesy of GoHenry. Apps and Prepaid card accounts to support children and teens develop practical money management skills.

Learning to Solve Money Problems: Practical Skills and Tools

One important aspect of teaching children about money is providing them with practical skills and tools that they can use to solve money problems. This can include basic math skills, such as addition, subtraction, and multiplication, as well as more complex skills, such as budgeting and financial planning. In the UK education system, pupils often perform more poorly in problem solving and reasoning assessments (KS1 and 2 SATs) that use skills associated with money, time and measurement. With this in mind, any practical applications and experiences that you, as a parent or carer, can give in a real-life context are essential. Other tools that can be helpful include financial calculators and online resources that are interactive and repetitive in nature. Even using sites like Hit The Button to practise times table fluency can help with confidence in solving money problems.

Overcoming Financial Challenges: Strategies for Success

Despite the best efforts of parents to teach their children about money, there may be times when children face financial challenges that are difficult to overcome. These challenges can range from unexpected expenses to job loss or other financial setbacks. However, by teaching children to be resilient and resourceful, parents can help them overcome these challenges and emerge stronger and more confident. It’s also essential that parents and carers communicate to children that it’s okay to seek help or ask for assistance. Whether it’s asking parents or teachers when they’re young, or seeking out the help of regulated financial advisers when they’re older, money worries should always be openly discussed and never taboo.

Some strategies that can be helpful include creating a financial plan, seeking out financial advice or support, and staying positive and focused on long-term goals. By helping children to develop a positive attitude towards money and financial challenges, parents can help them build the confidence and resilience they need to succeed in all areas of their lives.

Final Thoughts on the Importance of Practical Money Skills.

Raising financially savvy children requires intentional effort and consistent guidance. We have discussed various strategies and tools for parents to teach their children about money, including building strong financial foundations, encouraging saving habits, setting financial goals, developing money management skills, and instilling good spending habits. We have also discussed the importance of problem solving skills and provided specific practical skills and tools for children to solve money problems. By teaching children about money early on, parents can set their children up for future financial success.

To nurture practical money skills, parents should teach their children about money from a young age, encourage saving habits, set financial goals, develop money management skills, and instill good spending habits. Problem solving skills are also important, and children can benefit from specific practical skills and tools to solve money problems.

Raising financially savvy kids is an important task that requires effort, consistency, and patience. By teaching children about money early on and providing them with the necessary skills and tools, parents can set their children up for future financial success.


What is the best age to start teaching children about money?

It is never too early to start teaching children about money. Parents can begin by introducing basic concepts to preschoolers and building on those concepts as children grow older. If you’re in doubt, try talking to your child’s school about resources they might have access to which you can use at home to develop practical money skills. You can also consult our list of home learning resources that may help support maths skills outside of school

What are some effective strategies for teaching kids about budgeting?

Effective strategies for teaching kids about budgeting include setting a budget together, tracking spending, and teaching children to prioritise their spending.

How can I help my child overcome financial challenges?

Parents can help their children overcome financial challenges by teaching problem-solving skills, providing support and guidance, and encouraging their children to seek help when needed.

What are some good resources for teaching kids about money?

There are many resources available for teaching kids about money, including books, games, apps, and websites. GoHenry is a popular fintech app that offers a range of financial education tools for kids.

Leave a Reply

Your email address will not be published. Required fields are marked *