Teaching kids about saving money

Teaching kids about saving in childhood can help them build positive lifelong financial habits – and from pocket money to investing, there are a number of techniques you can use to build your child’s savings and financial literacy.

By Caragh Medlicott

Created on: 29/05/2020

Updated: 31/10/2025

Reading time: 7 mins

The way we learn about money in childhood can impact our attitude towards it later in life. That’s why it matters how we teach kids about saving, and when we decide to introduce it to them.

I’m sure we can all remember our first piggy bank.

For me, it wasn’t a “piggy” at all, but a blue box that looked like Dr. Who’s Tardis. Week after week, I’d collect my pocket money and listen for the ‘plink’ as I dropped the coins inside — thinking of all the Polly Pockets I could finally buy once I’d saved up enough cash.

Of course, the kinds of things children save up for might seem inconsequential to us as adults — but what is meaningful is the very habit of saving.

It’s a conversation you want to have at the right time. After all, you don’t want your child to worry about money too early, but don’t want to avoid the subject altogether, either.

But with a little forethought, teaching kids about basic financial habits can be fun, rather than complicated. In this blog, we’ll explore some simple, practical ways to help your child learn about saving, budgeting, and even investing, so they can build strong financial habits that will stick with them for life.

Talking to kids about money

Talking about money with your kids might feel like a big step, but getting started is often the hardest part. The truth is, though, that there’s no perfect age to start these conversations because every child is different.

Research suggests that money habits can begin to form as early as seven years old^[1], but as a parent or guardian, no one is better placed to understand your child and when is the right time to start this conversation than you.

A good way to introduce the topic is by keeping things simple and relatable. For example, you could talk about how you use saving yourself in order to create experiences they also benefit from, such as a family holiday or a birthday meal out at a restaurant. This is educational, and can also pique their interest as it involves experiences they personally enjoy.

Or, if your child is old enough, you could start using pocket money as a jumping off point to show them the value of saving firsthand.

If you’re wondering when the right time to bring this up is, why not wait for the next time your child asks you for a treat? Then you can introduce the idea of them saving to them while they’ve got a specific goal in mind.

For more ideas tailored to your child’s age, check out our guide on financial education for kids.

Things kids want vs need

One of the most important lessons in teaching kids about money is helping them understand the difference between wants and needs. Doing so will allow you to bring up the concept of budgeting and sinking funds — where money is set aside for specific known purposes down the line, like a future school trip or something else that might take some time to build up funds for.

Explain that “needs” are things we can’t live without, like food, clothes, or school supplies, while “wants” are things we’d like to have (such as sweets, toys, or games) but can ultimately do without. From here, you can explain that a sinking fund is a way of putting a little money away regularly in anticipation of a cost down the line.

You can also make this fun by turning it into a game. For example, ask your child to sort items into two categories — wants and needs. This can help them see how money is spent differently depending on priorities, and encourage them to think about how they’d spend their own savings.

How to teach kids to budget money

Teaching kids how to budget is a fantastic way to help them get to grips with managing money. There’s no perfect starting point, but around the age of 5-7 can be a good time to get started with this (and you can adjust the approach as necessary to be age appropriate).

Start by explaining that a budget is simply a plan of how they can use their money, in order to get the best out of it.

If they receive pocket money, an allowance, or money for special occasions, they can create a budget to decide how much to save, spend, or set aside for treats. This can be fun! They can consider the things they’d like to buy, and work backwards from the cost, figuring out how many weeks or months it will take to be able to afford it.

For younger children, keep it simple — maybe suggest splitting their money into three jars: one for spending, one for saving, and one for sharing or giving.

As they get older, you can introduce them to more detailed budgeting strategies, like saving a certain percentage of their money for bigger goals. You could even show them how you budget, explaining how adults often follow rules like the 60/30/10 method (where 60% goes to needs, 30% to wants, and 10% to savings) and adapt it to their level.

Remember, budgets are flexible! It’s important to teach kids that it’s okay to adjust their budget as their goals or needs change. Maybe by the time they’ve saved up enough for the toy they so desperately want, it’s lost its appeal — and that’s a lesson too.

Save or invest

Once your child understands the basics of saving, you can introduce the idea of saving for different goals — and even explore investing as a longer-term option. Here’s how you can break it down:

Short term goals for saving money

Short-term savings are for things your child wants in the near future, like a new toy, a game, or a particular outing.

Talk to your kid and explain that to save money for short-term goals, you can use a savings account designed for kids which – unlike a piggy bank – can help them earn interest over time.

This is a great way to introduce the idea of earning rewards for saving. It can also present an opportunity to explain AER% – Annual Equivalent Rate – and how it can help show the potential interest that could be gained over a year in a savings account.

Investing for kids

For longer-term goals, like saving for important milestones when they’re older, you can introduce the concept of investing.

Explain that investing means putting money into things like companies, property, or even commodities like gold, with the aim of growing their money over time.

It’s important to be honest about the risks involved – investments can go up and down in value, after all – but also explain how investing for a long time, like 5-10 years or more, could help overcome market changes and potentially grow their money more than a traditional savings account.

Of course, this can be a lot of information to take in for a young child. Sometimes using an analogy can help children make better sense of it.

There are a few different ways you can go with this — and you can scale up or down nuance depending on your child’s age.

Here’s one suggestion: Investing is a lot like trying to grow fruit and vegetables. In order to have the best chance at producing a full plate of food, you want to plant a few different types of seeds. You can also do things to promote growth like buying a greenhouse or watering with plant food — but that doesn’t change the fact that a blistering hot day or bad storm could mess up progress.

Ultimately, you need to be patient, and over time – much like an apple tree which starts out spindly but goes strong – you can see positive returns.

You could even use this as an opportunity to discuss compound growth (where money grows not only on their initial investment but also on the returns it generates over time). For example, saving £10 today and earning returns on it could mean they end up with more money than if they had just left it in a cash account.

To help them get started, you might want to consider opening a Junior ISA, which allows parents to put away savings on their child’s behalf which can then grow tax-free, ready for them to access when they turn 18. Check out our Junior ISA guide to learn more about how this works.

Learn more about investing for kids

Junior Stocks and Shares ISAs

If you’re ready to take things a step further, a Junior Stocks and Shares ISA could be a great way to teach your child about investing and help them grow their money for the future at the same time. This type of account allows parents – and any other important adults in your child’s life – to put away savings that can be invested in a mix of assets like shares, bonds, and property, giving it the opportunity to grow over the long term.

One of the key benefits of a Junior ISA is that the money is locked away until the child turns 18, giving them time to develop good money habits while ensuring their foundational savings stay out of reach. Plus, it’s tax-efficient, meaning they won’t pay tax on any growth or returns they make.

At Wealthify, our Junior ISA is managed by an award-winning investment team who handle everything for you — from researching and choosing investments to managing them over time.

It’s easy to open an account and track their investments using our simple app, so you and your child can see their money in action, and learn more about how investing works, to boot.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

Ready to start your child’s investment journey? Open a Junior ISA with Wealthify today

Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

Wealthify does not provide advice. If you’re not sure whether investing is right for you, please speak to a financial adviser.

References:

[1] https://infinityfinancialadvice.co.uk/the-surprising-effect-your-childhood-has-on-your-money-mindset/