The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

Recently an independent commission found that thousands of students are being put off applying to university by a rise in tuition fees. The first report revealed that applicant numbers to English universities are down 8.8% compared with two years ago – around 37,000 fewer students[1].

When you look across the rest of the UK, the conditions facing young people are worrying. A poor graduate job market, higher debt levels and inflation means that careful management of personal finances is key for the next generation. With GCSE and A level results dropping through letter-boxes throughout England last month, university and further education costs are a hot topic. Official figures released in August by the Independent Commission on Fees show that English higher education establishments will now be able to charge students up to £9,000 per year[1] – which could add up to a maximum of £27,000 for a three year degree course. Many young people will be asking themselves: “Can I afford higher education?”

At Scottish Friendly we believe in thinking long term when it comes to navigating a tough financial climate. So in this blog we have split our guide into four key chapters in life with some helpful tips for teaching children of all ages important money skills that will help them get a good start in life. Like any good habit, once you teach your children to establish a positive pattern, saving and managing money well should hopefully become second nature to them and can make a big difference to their adult life.

Throughout their childhood it is also important to remember you can save or invest on their behalf. Help ensure your child gets off to a good start in life by investing from £15 to £25 per month and using their tax-free savings allowance for a maximum of 18 years. Look out for products such as the Child Flexible Plan. You can make tax-free investments for a child aged under 16 to give them something to build on when they start adult life (remember tax treatment depends on their individual circumstances and tax law may change in future).

2-5 years old

  • Imaginary play – Children revel in make believe and the simplest play can be turned into a basic lesson on how money works. Empty your penny jar and turn a cardboard box into a shop or ice cream parlour by cutting out a window and door. Put some pots and pans in and play at being a customer with them as the shopkeeper using pennies.
  • Counting – Language and numeracy are fundamental skills that we learn from our parents. So counting out loud even early on can familiarise a child with numbers. One thing you could do with a toddler is paint colourful dots on a sheet of paper and count them out loud together. This will encourage the child to vocalise numbers and set the foundations for an appreciation of numbers and counting.
  • Watch and learn – Let your little one see you pay for things, and establish the pattern of behaviour in their mind: in order to get the shopping, mummy or daddy has to give some money. For older children you could let them participate, though keep an eagle eye on where the change goes!

5-10 years old

  • Savings reward chart – A smart way of encouraging children to adopt a savings mentality. If they have a toy in mind, say the latest Lego space station or Nintendo DS game, cut a picture out of a magazine and draw a Blue Peter style “totaliser” to chart their money saved. Keep a jar close by and let them mark off the increments towards their goal by sticking stars on the chart. Be disciplined though, and make sure they don’t see the money saved as a sweet fund every day!
  • Jobs around the house – Understanding that work and being helpful can result in some pocket money and may even take the strain off parents on the cleaning front. Set 5 simple weekly tasks and decide how much each one will cost, then put the money in the savings jar mentioned above.
  • Wants versus needs – Establish the difference with your child between what they want, and what they need. They may need a new school pencil case, but they probably want a new bike. Talk to them and explain sometimes it is better to put money into the thing they need, and hard work will result in the things they want.

10 – 16 years old

This age group is critical because of the huge changes that take place in life that will establish how a child perceives, saves and spends money.

    • A current account – Many parents will feel the time is write to open a basic bank account for their child to give them some independence and lessons about managing money, security and saving. Parents can use this as an opportunity to explain how banking works.
    • Pocket money / a first job – A part time job in the holidays can be a great way to earn some money, gain some experience and meet new people. Whether it is mowing lawns, a paper round or cleaning cars.
    • Talk about goals – Your child will rapidly be becoming a young adult and saving for a goal such as a trip abroad, university, or a career. The earlier they can establish goals, the earlier you can work out a financial plan as a family to help them get to where they want. This summer young Olympians including Yohan Blake, Greg Rutherford and Laura Robson are great examples of how aiming for goals can lead to great things. It will have taken discipline, sacrifice and financial backing – but as the saying goes, “Anything in life worth having is worth working for.”

16 and Upward

        • University – The big decision will be whether your child will want to enter higher education in the pursuit of a degree or not. If your child decides University is for them, sit down and look at their savings, talk about a budget and how much the family can support them. Research funding help and the best available savings plan for them. The personal finance experts at The Daily Telegraph have just published an article on Student finance: how to manage your student finances, from bank accounts to online discounts, which makes for interesting reading.
        • ISAs – Your child will become eligible for standalone ISA investments on their 16th birthday. They could also invest between £15 and £25 a month as part of a Family Flexible Plan, which is run by Scottish Friendly for families in the UK. The purpose of the plan is to let you invest as a family and beat the taxman together! You invest for 15 years but each family member’s policy has built in flexibility, allowing you to cash in your plan early if needed. This is over and above other tax-free allowances such as ISAs. Again, you must remember that tax treatment depends on your individual circumstances and tax law may change in future. Also, if you access your plan value before 10 years you may have a tax charge to pay as well as a £50 deduction from the cash-in value.

We hope these basic tips come in handy when thinking about children’s finance. The key thing is to speak openly about saving and investing. Allow children the right amount of responsibility as they grow and make sure they develop a simple and regular savings habit that helps them towards their goal.


[1] Independent Commission on Fees

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting Advisers may charge for providing such advice and should confirm any cost beforehand.