Lessons in money: what your children need to know

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If the spring sunshine is leaving you a little too cheerful take a quick look at the personal debt statistics for this country – on average we each owe £6,346 (not including mortgage debt), according to The Money Charity – that should bring you down to earth with a thump.

Many experts, and myself, blame the lack of financial education in this country. So, what are the vital money lessons you need to teach your child?

If you look at the statistics for debt and savings in this country it isn't hard to see that the younger generations are careering towards financial disaster. A third of people aged 18-24 have no savings whatsoever.

A recent survey by TopCashBack.co.uk has revealed that 83% of parents have paid off debts for their adult children. Many people blame low earnings, soaring house prices, and a rise in the general cost of living for the fact so many of us are in debt. But, there is another problem – a lot of us are just really bad at managing our finances.

Of the parents that admitted to having to bail out their children, many blamed a lack of financial knowledge. Some said they were bad with money themselves as their parents hadn't taught them about money management and 38% admitted that they wished they'd spent more time educating their children about money and budgeting.

So, what are the money lessons you really need to teach your kids?

1. Saving pays
Teaching your children to save for things they want is an invaluable lesson. Encouraging your child to set aside some of their pocket money into a piggy bank in order to save up for things teaches them that sometimes you have to wait for things.

An easy way to start this is to get your child to put some of their pocket money aside each week so they have holiday spending money. Perhaps encourage them by agreeing to match whatever they save.

2. Earn your spending money
Many children grow up thinking money is easy to come by. They ask Mum or Dad for cash or goods and those goods appear. Teach your child that they have to earn money by only giving them a basic pocket money but encourage them to earn more money by doing chores.

3. Money can grow
As soon as your child is old enough you can start teaching them about the wonders of compound interest. How putting their money into a bank account can mean it earns interest and grows faster. A great way to do this is with a Children's Regular Savings account. Halifax's Kid's Regular Saver account pays 6% interest as long as they pay in £10 a month for a year. That means after a year your child will have saved up £120 plus £4 interest.

Alternatively, let your child monitor their own Junior ISA. Teach them about how their money grows in a cash JISA and get them to help you shop around for the best rate each year.

4. Investing pays
If you've got a teenager then you can start to teach them about how the stock market and investments work. One way to do this is to pick five stocks that look like they'll rise in the coming months. Then get your teenager to research all five and pick which one they think is best. Then track its price. You don't have to invest in it for real, but that can help hold their interest.

5. Play games
There are numerous apps out there aimed at teaching children about money. For example, Rooster Bank or My Money Shaker. But, you don't have to go high tech. Monopoly is a great way to teach children how to manage money and invest wisely – we all remember learning that blowing all your money on Park Lane and Mayfair doesn't guarantee a win.