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Ask the Expert: When's the right time to start teaching my children about money?

Carl Lamb talks to parents about when to start teaching their children about money. Picture: Getty Images/iStockphoto

Carl Lamb talks to parents about when to start teaching their children about money. Picture: Getty Images/iStockphoto

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This week our reader wants to know when it's time to start teaching their child about finances. Carl Lamb, director and chartered financial planner at Smith & Pinching, responds.

Reader question:

I want to teach my children about money from an early age - they're currently in primary school.

Do you think Children's Bank Accounts are a good idea?

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They seem good for managing money on a day to day basis but I also want the children to learn about saving and investing. Smith & Pinching response:

Can I firstly say how great I think it is that you are planning to give your children financial education from a young age?

So many young people come out of school having no real understanding of managing their money.

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We've run some outreach days with schools to try to get the message across and have found that they are really appreciated.

To answer your question, yes I do think that Children's Bank Accounts are a good idea as a first step in their education. You can open a savings account for children with most banks/building societies at any age but accounts with current account functionality, including payment cards, are often only for children over the age of 11 - and for some you have to be age 15 or 16.

This means that managing their day-to-day spending may have to be cash-based until they get old enough.

There's a wide range of accounts with differing terms - fixed term rates, withdrawal restrictions or penalties, requirements for regular deposits etc - so plenty of opportunity there to discuss your children's financial needs and expectations.

Interest rates for children's savings accounts can initially be quite good - well above inflation for the first year - but then will drop again, so you may need to switch accounts to get better rates.

That's something else that could be quite an interesting discussion with the children and provide an insight into how banks work.

Being a child doesn't mean you don't pay income tax, if your earnings are high enough.

They do, however, get all the normal allowances - personal allowance (now £12,500), the starting rate for savings (£5,000) and the personal savings allowance (usually £1,000).

One final point to remember is that if the money in the savings account has been given by their parents and generates more than £100 in interest in a tax year, then that interest is taxed as the parent's income not the child's.

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