Rupert Lee-Browne is the chairman and chief executive of payments fintech Caxton, which he founded in 2002.
The importance of financial literacy today cannot be overstated. According to research conducted by Money and Pensions Service, children start to learn vital money skills and habits between 3 and 7 years old.
One of the most effective ways to ensure a secure financial future for the next generation is often overlooked: empowering children to make financial decisions from an early age. By involving children in financial discussions and decisions, parents can instill critical money management skills that will set the stage for a lifetime of financial success.
Why Start Early?
The skills, habits and mindsets we form in childhood often shape our behaviors and tenacity as adults. This is especially true when it comes to money. Early financial education can provide children with the tools they need to navigate the complexities of personal finance, from budgeting and saving to investing and understanding credit and debt.
Consider the example of Serena Williams. Known worldwide for her dominance on the tennis court, Serena initially focused all her energy on her game, with financial matters taking a back seat. She would even forget to pick up her winnings her first year on tour.
In a 2024 interview with Bloomberg’s The Deal, Serena explained how her father empowered her to manage her own finances from an early age:
“I got these huge checks. [My dad], he’s like, you figure it out … I was 16 and he’s like, you know, most parents, you know, they take your money. They take something. But you know, he’s like, ‘You figure it out.’ And so I remember having to figure that out and having to learn how to manage from a very early age. Yeah. And not get crazy with it. And so he empowered us to do that.”
Three Practical Ways To Teach Children About Money
Empowering children with financial knowledge doesn’t have to be complicated. Here are a few practical, everyday ways to involve them in financial decisions that can make a significant impact.
1. Provide Pocket Money To Teach Budgeting
Providing children with pocket money is a straightforward way to introduce them to money management. By giving them a set amount of money each week or month, parents can teach their children the basics of budgeting. Encourage them to allocate their pocket money toward different goals, such as saving for a toy, donating to a charity, or spending on immediate things they’d love to do or want.
This simple practice helps children understand the value of money and how to start making thoughtful spending decisions with short- to long-term views. A pocket money card is a great introduction to digital money.
2. Set Savings Goals
Another effective way to empower your children is by helping them set savings goals. Whether it’s saving for a new bike, days out with friends, or putting money aside for university or traveling, setting both short- and long-term goals teaches children the importance of delayed gratification.
This practice not only helps them develop patience and understand the value of money but also instills a sense of accomplishment when they reach their goals.
3. Involve Children In Financial Decisions
One of the most powerful ways to teach children about money is to involve them in real-life financial decisions. For example, when considering a major purchase or discussing the family budget, parents can include their children in the conversation. This practice not only makes children feel valued but also provides them with a practical understanding of how financial decisions are made.
Take Serena Williams as a case in point. She attended the negotiations of her first major sponsorship deal at the age of 16 with her father. Negotiations continued beyond midnight. This involvement gave her critical insights into how deals were structured, negotiations going back and forth, and how these important decisions would impact her career and personal life. She said, “I learned early on that your paycheck from tennis—maybe that’s why I forgot them—should be your smallest earning.”
By involving their children in similar ways—whether it’s sitting in on discussions about household budgets, meetings with a financial advisor, or discussing the costs of a family holiday—parents can give them a head start in understanding the complexities of finance and the compromises that are made.
The Role Of Parents And Schools
Children learn by observing, and when they see their parents making thoughtful financial decisions, they are more likely to adopt similar behaviors. While parents play a crucial role in their children’s financial education, some may feel they do not have a good grasp of managing their own finances to teach their own children.
There are a range of simple and intuitive financial tools and resources designed specifically to help children and parents. Schools also have an essential part to play. Simple actions, like discussing the household budget, explaining the reasoning behind financial choices, or even taking children to the bank, can have a lasting impact.
Financial literacy programs in schools can complement what children learn at home, providing a comprehensive education that covers everything from basic budgeting to understanding investments and credit.
The Gift Of Empowerment
Empowering children with financial literacy from an early age is one of the most valuable gifts parents can give. By involving children in financial decisions, setting practical money management tasks, and advocating for financial education in schools, we can ensure that the next generation is equipped with the knowledge and skills they need to succeed.
In a world where financial independence is key to a secure and prosperous life, there’s no better time than now to start teaching children the importance of money management. It is a fundamental and basic life skill. By doing so, we are not only preparing them for their future but also contributing to a financially literate society that can make informed and responsible decisions.
The earlier children are introduced to the realities of finance, the more empowered they will be to take control of their financial futures—and that is the best start in life we can give them.
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