Teaching Kids to Save and Invest Beyond Piggy Banks

While schools teach reading, writing and maths, few offer lessons in critical money management skills. Yet in today’s world, teaching kids to save and invest is an essential life tool. Equipping our kids with saving, budgeting and investing knowledge can help them thrive. This allows them to pursue opportunities early, fund goals like university or gap years, start businesses, buy cars or homes in future, and live fuller, less restricted lives.

When is the right age to start building these capabilities? Right now!

Don’t underestimate young minds. With clever saving strategies like coin jars or money boxes alongside basic investing principles practiced in a safe, engaging way, even young children begin learning how to meet short and long-term money targets.

Beyond just piggy banks, a little consistent guidance helps form good lifelong habits.

This blog shares ideas on how parents can teach core money lessons at different ages through activities, games and open dialogue. Let’s explore fun, hands-on ways to set children up to manage finances independently in the future.

Why is Teaching Kids to Save and Invest From a Young Age Important?

Life today looks very different compared to our own childhoods. Where we may have gotten occasional pocket money for sweets, kids now have greater personal expenses like mobile phones, streaming sites and in-app purchases requiring larger sums, making teaching kids to save and invest a lot harder!

University fees and costs are rising exponentially too. Then there’s modern financial realities like auto-enrolment pensions and economic turbulence to factor in. While schools cover some personal finance education basics, most experts believe there’s room for parents to do more frequent, earlier lessons at home.

Here are five key reasons to start these chats with children early:

1. Form Good Money Habits

According to research conducted by the University of Cambridge and published by UK-government backed service MoneyHelper, did you know that kids will have formed most of their money habits by the age of 7? Habits and assumptions about money originate in these formative years. Kids notice cues from parents about saving vs spending. Early positive reinforcement helps them associate smart money management with rewards later in life.

Teaching investing alongside saving shows earnings and compound growth over time. This understanding can cement regular investing as a lifelong habit too.

2. Boost Financial Confidence

Young people often feel overwhelmed or anxious about managing money. Yet, like any skill, hands-on practice builds competence and confidence over time.

Giving kids control of small amounts to practice budgeting, savings goals and investing helps demystify finances for when they earn and manage larger sums as teens and adults.

3. Promote Independence

Clear lessons about earning, saving and investing money enables kids to make informed choices rather than relying long term on parents as a safety net.

Understanding concepts like inflation, returns and risk also helps them problem solve money scenarios solo later versus just copying others’ actions.

4. Spark Entrepreneurship

Encouraging earning money from a young age via allowances, working for neighbours or small ventures seed entrepreneurship potential early.

Pairing these opportunities with saving and investing guidance maximises what children learn about how to fund, run and scale their own ideas.

Read our blog “7 Tips to Helping Your Child Start a Business at Home” for more advice!

For more practical help in sparking your kid’s entrepreneurial spirit, take a look at our Young Entrepreneurs Bundle in our Etsy store containing 6 workbooks that teach kids about different aspects of running a business!

5. Set Them Apart

Money savviness and investing smarts give young people an edge over peers and enhances career prospects where financial roles are involved. Hiring managers take financial capability seriously.

In an uncertain economic landscape, trainable money skills may safeguard children’s future livelihoods too.

When Do Kids Understand Money Concepts?

Children develop at different paces, but most educators agree money comprehension aligns roughly with:

• Ages 3-7: Simple ideas like identifying coins/notes, buying items in shops, sources of money
• Ages 8-12: Earning, saving for goals, budgeting pocket money, bank services
• Ages 13-18: Tax, credit, investments, retirement/pensions

However, introducing age-appropriate lessons progressively from young ages cement key ideas better as kids expand understanding over time.

See our blog “Earning their Keep: Age-Appropriate Chores for Kids to Earn Money” for advice on how to teach different ages how to earn money at home!

Teaching Kids to Save and Invest by Age

Tailor money discussions around children’s developmental level. Explain concepts simply then gauge their grasp to adjust accordingly. Here are ideal saving, budgeting and investing topics to cover from toddlers upwards:

Ages 3-5

Start money chats by explaining where funds come from and what they’re used for. Kids understand working to earn. Start an early savings habit:

• Name coins and notes while shopping, counting small change, receiving gift money etc. Compare sizes, colours and materials coins are made from
• Set up a cash box/piggy bank and encourage them to deposit coins/notes as savings whenever possible
• Discuss saving to buy special items they want, like toys or bikes
• Play shopkeeper using toy money and tills
• Read illustrated story books about money aimed at young kids

Ages 6-8

Reinforce money concepts learnt between the ages of 3-5, plus discuss discretionary spending:

• Introduce regular pocket money and set rules on spending/saving portions
• Open their first basic savings account at a bank or building society
• Track money saved for goals like video games in a ledger or app
• Play board games about finance and entrepreneurship e.g. Monopoly (junior version) and The Entrepreneur Game where players must decide what type of business they want and give it a name, whilst also deciding what products to offer.
• Watch kids’ cartoons and videos on money topics – famous investor Warren Buffet’s ‘Secret Millionaires Club’ is a great resource in cartoon video and comic book formats!

Ages 9-12

Expand on previously learned topics. Begin introducing investing and compounding:

• Discuss loans, credit and debt risks
• Research different ways to invest money beyond savings accounts e.g. bonds, stocks, funds
• Open custodial investing accounts and make their first investment purchase
• Calculate compound interest examples
• Do business earning exercises like starting a lemonade stand – see our blog “14 Fun Business Activities for Kids to Spark their Business Spirit” for more business ideas to start at home with your kids!

Ages 13-15

Share more complex aspects of personal finance management:

• Guide budgeting increased pocket money/ part-time job income
• Explain taxes on income
• Discuss how to minimise income tax via legal personal allowances like Individual Savings Accounts (ISAs)
• Research different asset classes to invest in like property, fine art, antiques etc.
• Calculate returns on investments over longer timeframes and use online interest/savings calculators

Ages 16-18

Discuss advanced money topics relevant to adulthood like loans, pensions and insurance:

• Explain common tax types beyond income tax e.g. capital gains, corporation tax
• Describe different loan options available later e.g. personal loans, mortgages, business funding
• Share basics of pensions and importance of starting retirement saving early
• Discuss insuring valuables like cars, homes plus life and income protection

Reinforcing repeated core lessons at every age about earning, budgeting and saving money, while introducing age appropriate investment concepts builds robust knowledge and skills.

Choosing the Best Savings and Investments Accounts

To encourage and teach kid to save and invest, you can open a regular saving and investing account from a young age:

Savings

Junior cash Individual Savings Accounts (ISAs) offered by most UK banks and building societies allow penalty free withdrawals so kids can readily access savings. Interest rates are variable but most pay higher than standard savings.

Alternatively, children’s savings accounts usually accept small opening deposits like £10 and pay similar interest to adult equivalents. Features like cash cards help kids manage their own funds.

Investing

Start modest by opening a Junior Stocks and Shares ISA with as little as £25 that allows holdings in funds, investment trusts, bonds and shares. Being sheltered from tax on returns incentivises future saving.

If parents have brokerage accounts already, adding custodial accounts lets kids access the same platforms and tools while parents oversee activity. Keep an eye out for investing simulators too which can be a great resource to teach kids about investing without the risk of losing any money!

Compounding works best over long time periods so even small, regular investments from young ages accumulate well for sizeable 18th or 21st birthday money gifts.

Everyday Activities for Learning About Money

Daily moments present chances to discuss finances:

1. Grocery shopping – Calculate discounts and best deals or unit prices on items. Have kids use a budget and select purchases independently.
2. Running errands/odd jobs – Pay small commissions for household tasks. Link effort to rewards.
3. Receiving money gifts – Split between saving, short term spending and longer term investing. Track amounts.
4. Family leisure activity – Allocate a budget and have kids research costs for entry fees, food etc.
5. Paying bills – Explain household expenses and utilities pricing and have honest and open conversations about it at family “meetings”.
6. Online browsing – Add items to carts and discuss impulse buys versus needs/affordability.
7. Watching TV – Explain advertising and real costs beyond what’s marketed.
8. Reward systems – Tie pocket money to good behaviour to reinforce money/work link.
9. Planning bigger goals – Calculate spending needed for future items like electronics or holidays.
10. Contactless payments – Discuss ‘invisible’ spending versus using cash.

For more advice on how to weave financial lessons into daily life, see our blog “Turning Everyday Moments into Fun Financial Lessons for Children”.

Games and Activities for Financial Literacy

Learning through play cements lessons for kids better than lecturing. Interactive saving and investing games make money management engaging:

1. Business Venture Challenges

Let creativity loose by holding mini ‘Shark Tank’ style pitch contests for invented products. Provide play money for start-up funding pots to cover R&D, testing etc. Have kids handle expenses, sales capital and growth reinvestment.

See our “Elevator Pitch” digital workbook in our Finabee Etsy store for a great resource to help build confidence in your kids through play and fun activities!

2. Virtual Stock Exchanges

Practice researching and buying/selling stocks and funds on mock trading platforms using imaginary budgets. Monitor portfolios daily and modify accordingly. Discuss factors influencing values and strategy. At Finabee, we are big fans of Trading212 for both investing without fees but also having a great simulator!

3. DIY Investment Trusts

Research actual dividends paid by FTSE100 firms annually. Simulate pooled money between players being invested across selections of these companies. Calculate returns yearly based on real dividend amounts.

4. Interactive Money Board Games

Classic family board games like Monopoly involve earning, budgeting, investing in properties and balancing risk. Newer games like Cashflow 101 adapt this for different financial lessons.

5. Educational YouTube Channels

Fun learning platforms like EvanTubeHD feature dedicated kids’ series on money topics from ads tricks, to entrepreneur tips, interviewing junior business founders.

6. Financial Literature

From The Squirrel Manifesto creative tale to math geek, fictional hero Alex’s Adventures in Numberland, books make reading about money management entertaining.

With repetition across learning formats, good financial habits become intrinsic over time. Each positive money conversation or game session compounds like interest into the next, bringing lifelong benefits.

7. Lead By Example

Our own saving and investing behaviours as parents serve as the most influential financial literacy lessons for kids. So exemplify smart money management daily:

• Discuss household budgets, needs versus wants and sticking to financial plans
• Show kids account statements and pension plans
• Involve children in household spending decisions
• Verbally reinforce why you’re saving and investing surplus income

Simply hearing why and seeing how we make sound day-to-day money choices teaches more than any lecture.

Plus, always remain patient – financial literacy is an ongoing journey for children and adults alike. What matters most is sparking engagement and curiosity to build on progressively.

Empower Kids with Financial Know-How for Life

Equipping children to earn, manage and invest money engenders confidence plus skills to handle their financial futures on their own. While schools cover some basics, the job largely falls to us parents. But teaching money lessons needn’t be a dry, boring task.

Make saving and budgeting a regular habit. Break investing down into simple building blocks. Bring concepts to life through games and activities. Most importantly, lead by example in your daily financial actions and commentary.

Guiding practical understanding from a young age allows kids to internalise positive money management which they carry for the rest of their lives. So start those home money mentorship sessions today!

So How Can Finabee Help with Teaching Kids to Save and Invest?

Here at Finabee we believe that all children should have access to financial and entrepreneurial education to inspire and build good money habits from an early age. Download our Young Entrepreneur Bundle today to equip your kids with the skills to start their own business and make their entrepreneurial dream come true!

Read a bit more about us here and how we plan to raise a generation of finance-savvy children for the future. Click here to learn more about how it works.

You can signup to the waiting list here for our app too to be one of the first to use it and be in with a chance of winning a £50 voucher!

Now that’s a savvy investment!