Children and money: How to teach your child how to deal with money healthily in a playful way

People don’t talk about money. This sentence still characterizes many families today, and that is exactly the problem. Because if money remains a taboo at home, children learn how to deal with it not from everyday family life, but later from their own mistakes. Studies on financial literacy have shown the same pattern for years, with young adults feeling ill-prepared when it comes to saving, debt and investing.

Understanding money does not begin in adulthood, but in the first years of life, when children observe, imitate and make their own small decisions. The good news is that you don’t need a finance degree. It is enough to make money visible in everyday life and to give your child responsibility in an age-appropriate manner.

Why starting early is worth it

Children develop their basic attitudes towards money earlier than many parents think. A widely cited study by Cambridge University on behalf of the British Money Advice Service came to the conclusion that basic money habits are already formed by the age of around seven. That doesn’t mean a four-year-old has to understand interest. It means that everyday experiences, such as weighing up between two wishes or waiting for a major purchase, have a formative effect from an early age.

Anyone who starts here doesn’t convey a dry theory, but rather a feeling that money is limited, can be allocated and waiting can be worth it. It is precisely these important insights that later form the foundation for a healthy approach to consumption, saving and provision.

Learning money in everyday life: four practical approaches

Use pocket money as a training ground: Pocket money is the most important learning tool you have at your disposal. The important thing is that your child is allowed to use it freely and make bad decisions from time to time. If you spend all your pocket money on the first day and then wait two weeks, you will learn more about planning than any admonition.

It is important not to link pocket money to school grades or homework. It should be a reliable training ground, not a wage that is lost for bad behavior. As a rough guide, many family counseling centers recommend around 50 cents to one euro per year of life per week at primary school age, paid at fixed, reliable intervals.

Make savings visible: Abstract numbers mean little to young children. A transparent savings jar in which the money slowly increases, on the other hand, has an immediate effect. Your child sees the progress, can touch it and understands that many small amounts become something bigger over time. The visible growth is the child-friendly preliminary stage for later understanding of compound interest.

Work with savings goals: A concrete goal is more motivating than an abstract request to save. The Lego set, the bike or a trip, all of these make the meaning of doing without tangible. Help your child break the prize down into manageable stages, such as how many weeks it will take to reach the goal. In this way, you experience saving as a planable path and not as an endless sacrifice.

Explaining money in everyday life: Children learn most while doing things. When shopping, explain why you are choosing a product, talk about the difference between wanting and needing, and involve your child in small decisions. These casual conversations in particular remove taboos from the topic, without any finger-wagging.

From the savings box to long-term wealth creation

At some point the savings jar will reach its limit. When it comes to building up larger sums over many years, for example for a driver’s license, training or starting your own life, cash continually loses purchasing power due to inflation. This is where the learning game ends and serious precautions begin.

The principle behind it is this compound interestand with children time is the biggest lever.

An example:

Anyone who invests 50 euros a month from the first year of life will have deposited around 10,800 euros by their 18th birthday. Assuming a long-term return of around 6 percent per year, this could amount to roughly 19,000 to 20,000 euros, depending on market developments. The difference arises solely from the long term. Important, this is a calculation example and not a guarantee, because price fluctuations are part of it and losses are of course possible at any time.

There is an often overlooked tax advantage when it comes to having children. If a deposit is kept in the child’s name, the child has their own Saver’s flat rate of currently 1,000 euros per year, within which capital gains remain tax-free. Added to this is the Basic allowanceprovided the child does not have any significant income of their own. In many families, income can be collected tax-free for years. It should be noted that the assets legally belong to the child and are transferred to their disposal when they come of age.

At this point, many parents want to create an ETF savings plan for their child because globally diversified stock ETFs have historically offered attractive return opportunities over long periods of time. However, doing this yourself requires effort, from selecting suitable ETFs to global diversification to regular rebalancing, i.e. resetting the weighting when individual asset classes have grown more strongly than others.

Digital asset management takes on exactly these tasks. A provider like Oscar² For example, the investments are pooled in a broadly diversified ETF portfolio that is automatically managed and adjusted. Savings plans are available for as little as 25 euros per month, and separate accounts can be maintained for the whole family, including separate savings plans for each child. For parents who want to make provisions for the long term and without constant self-management, this is a pragmatic solution that meaningfully complements the child’s financial learning process.

By the way: on the occasion of the cinema release of “PAW Patrol: The Dino Movie” on August 6th Oskar is currently giving away one of the new kids savings plans Family trip to New York². A nice opportunity to tackle the topic of saving together with your children, even if the real value of course lies in long-term wealth creation.

Understanding money as part of education

Of course, financial education is not just a one-off conversation; it grows with your child. In kindergarten age it’s about the visible savings jar, in elementary school it’s about pocket money and initial savings goals, in adolescence it’s about topics such as having your own account, contracts or your first experiences with the stock market.

Anyone who makes money a natural part of family life at an early age gives their child skills that are rarely taught at school. And the best part is, you don’t have to be an expert. You just have to start talking about it openly.

Frequently asked questions from parents

At what age should my child receive pocket money?

It usually makes sense to start at primary school age, i.e. from around the age of six, when children understand quantities and simple arithmetic. At younger ages, the visible savings jar is better than regular money.

How much pocket money is appropriate?

As a rough guide, around 50 cents to one euro per year of life and week for primary school age, and later a monthly amount. More important than the amount is the reliability of the payout.

How do I invest long-term money for my child?

For short-term savings goals, a savings account is sufficient. For long-term development over many years, many parents use broad ETF savings plans, either on their own or via digital asset management, which automatically takes care of the selection and rebalancing. A deposit in the child’s name can bring tax advantages.

²Note: Oskar is a brand of Oskar.de GmbH, a spin-off of finanzen.net GmbH. Scalable Capital Vermögensverwaltung GmbH manages the assets, Baader Bank AG manages the securities accounts with clearing accounts. Further information can be found here.