How to talk to your children about money management this Christmas

Christmas is a great time to talk to children and young people about money – it’s the biggest spending season of the year, after all.

I find that often, people think teaching kids about money is about sitting them down and taking them through how to draw up a budget, teacher-pupil classroom style.

And while that is absolutely useful, we forget – or are unaware – that so much of what we learn is through modelled behaviour.

Research carried out in 2013 by the government-backed Money Advice Service (now known as MoneyHelper) and behaviour experts at Cambridge University found that adult money habits are formed by the age of seven.

Children learn from their parents and carers’ relationship with money, both consciously and subconsciously. Consequently, as a parent and carer, how you manage money influences how your children will manage money as adults.

What is your behaviour teaching the children and young people around you about money this Christmas season?

A phrase I like is “presence over presents.” I’m all for spending money you can afford on the things that matter to you and enjoying every purchase without guilt, shame or regret. But I know how easy it is to go over the top at Christmas, to keep up with the Joneses.

Nowadays, we also have to contend with strangers on social media displaying their consumption for all to see and establishing new normals for stuff, spending, and “this is how we celebrate”.

The result? A Christmas overspend and starting the new year with a festive financial hangover.

This is why I like “presence over presents” as a reminder to everyone – especially parents – that spending time together matters more than spending on gifts. Because how much you spend on gifts for someone isn’t an indication of how much you love them.

Let’s avoid the trap of equating the cost or size or number of gifts with love – and passing this modelled behaviour on to the next generation.

I also get how “presence over presents” can come across like I’m chastising people for buying “too many” gifts.

It’s about balance, says Katie Watkins, a 35-year-old personal finance content creator, money coach and mother of two girls aged four and seven, from south Wales, who shares online as Katie Saves.

“I appreciate the sentiment of presence over presents and it’s definitely got merit. But it’s striking that balance between being a helpful reminder for parents and shaming people for spending too much and trying to take the moral high ground.

“You need to remember what’s important to you and your family, not social media or what you show the outside world. What’s important to me and my family is making memories while my kids are young enough to appreciate the magic of Christmas. And doing this in line with what we can afford as a family.”

I agree. Balance is why I like the four-present rule, where you buy your child something they want, something they need, something to wear and something to read.

This rule allows you to give and spend and enjoy today – while ensuring your future self avoids that festive financial hangover after buying multiple ‘just one more’ gifts.

Be mindful of the language you use about money around children. I know first-hand how terms like “not enough”, “too much” and “too little” can stick with young people and play out in their behaviour in adult life, from feeling guilty about spending and stockpiling money unnecessarily to spending money they don’t have.

Katie Watkins says: “Don’t be afraid to talk about money around kids. Open conversations are important for kids to realise that money’s not a taboo topic.

“I want my daughters to be confident to go into work and negotiate their pay, for example. Talking about money and building that confidence starts now, while they’re young.”

“Model the behaviour you want your children to pick up. Show intention with your money, whether you’re spending it or saving it and why.

“I’m clear with my girls that when they get money for Christmas and birthdays, they can spend some now but they have to save some too. And I explain why – that they’re allowed to enjoy their money now but it’s important to put money aside for the future too.”

For three and four-year-olds, counting and playing shop; for five and six-year-olds, shopping trips help show them spending and saving. For children aged seven and eight, this is a good time to introduce pocket money. When kids are aged nine to 11 you can start to teach them about paying bills, budgeting, and how credit works.

With teenagers, this is a good age to teach them financial responsibility. Talk them through your financial responsibilities. You could go through your household budget with them and discuss what comes in and what goes out every month and why.

With adult children, aim to empower, not enable. You can help your adult children become financially independent and resilient by helping them stand on their own two feet.

You’ll find more ideas and activities in the free Talk Learn Do resource for parents and carers on the MoneyHelper website.

Talia Loderick is a money coach. She helps people understand and take control of their behaviour with money so they can stop stressing about money and have enough to live well – now and in future. Visit: talialoderick.co.uk