Part of teaching your child to become financially responsible is showing them how to track and understand their finances.
Yet, according to research from the Money Advice Service, 1 in 5 British adults can’t read a bank statement, and 14% don’t track their income and expenditure.
It’s just one of the many reasons why it’s important to teach kids about money and encourage them to read their bank statements.
Here’s what they need to know.
What is a bank statement?
Helping your kids to stay out of debt and be smart with their money is all about money management, and one of the best tools for this is a bank statement.
A bank statement is an official document from a bank that shows you all the activity on your account over the last month. Here you will see all the transactions you have made. That’s all the money going out of your account to savings or from purchases, and all the money coming in. money such as gifts, pocket money, earnings and refunds.
Unless your child keeps a daily log of their spending, bank statements are the only way to track your money, look at your spending habits and spot fraudulent transactions on your account. It may not be necessary now, but as they get older, tracking their pay, outgoing bills, and spending becomes essential to staying out of debt.
How to read a bank statement
Though a bank statement is designed to be simple to understand, the first time your child looks at one can be daunting.
All banking statements have items 1 to 4 below, but the main bulk of a statement will be the transactions list. This list tells you everything that happened to your account this month. So outgoing money, incoming money and your remaining balance.
Here's how to break it down:
Bank: The name of the bank at the top
Account: The name of the account you are looking at with the account number. You will get a statement for each account if you have a number of accounts with the same bank.
Statement date: The date range the statement is for; usually, this is a month.
Summary: An 'at a glance' summary of the month'. This tells you how much you have spent and how much money came in this month.
Transaction date: When the transaction took place
Description of what the transaction was (ATM, shop, money given to you by a relative)
Paid in or out: Whether this transaction was money out (also known as debit or withdrawal, or money in (also known as a credit or deposit)
Balance: The amount of money you had left after each transaction
Interest: Some current and savings accounts earn interest, and list this at the bottom of a statement.
How can your kids get a bank statement?
Bank statements don’t always get sent out automatically. Often you have to let your bank know if you want one monthly and how you want to receive this, for example, online or by post. If you are registered with your bank to use their app, statements will automatically be loaded onto this for you to view whenever you want.
The same goes for GoHenry accounts. Statements are available on the GoHenry app at all times and will list by date:
Money sent to regular saving pots
Expenditure – what’s been spent where and when (including subscriptions)
When pocket money comes in
Why it’s important for kids to understand bank statements
It’s important for kids to understand bank statements for three key reasons:
It helps them to control their spending
One in five Brits don't keep track of their monthly spending, which is bad news as knowing what you spend is vital for good money management. If you don’t know what you’re spending and what money is coming in, you can’t save, stay out of debt or ensure you have enough money to pay your bills.
It teaches them how to budget
GoHenry research reveals that young people who develop good financial habits early in life tend to become financially responsible and independent in adulthood. Viewing your statements and using them to learn how to budget is one of those good financial habits.
It helps them to become aware of mistakes and fraud
This means checking your statement carefully for mistakes and even fraud. Perhaps a subscription you have cancelled has been taken, a refund has been processed incorrectly, or something you don’t recognise appears. You won’t know about these things unless you check your statement.
Conversation starters for talking to your kids about banks statements
Ask your kids if they know how to check if something’s been paid to them
This is a good way to get your kids to start checking the references on their statements. If it’s from you, it’s likely to say allowance (on the GoHenry app) or pocket money. Grandparents may add Christmas or birthdays to their reference. Right now, this may not seem important, but as they get older with more payments coming in, they need to get used to checking what’s been paid to them and what hasn’t.
Talk about fake bank statements, which may come via email or texts
This may be a fraudster trying to get you to click on a link, so firstly, only ever view statements through an app or your bank’s proper banking gateway. Secondly, learn to spot fake statements, which tend to have spelling errors, or the logo looks strange or asks you to take action. Banks will never ask you to action anything through a bank statement.
Talk about why you need to keep bank statements
It’s wise to keep bank statements for about a year, just in case of ongoing errors and because they are a good reference should you want to apply for a loan. You can keep a hard copy, or your bank will allow you to access your statements online for at least one year.
Talk about what automatic outgoing payments are
Payments by a debit card and prepaid debit card like GoHenry leave an account immediately. However, additional payments may appear on your bank statements, for example, a standing order for a subscription. These are set up with companies like Netflix for a fixed monthly amount. There are also direct debits with companies needing flexible amounts from your account. For example, phone companies offer direct debit payments as the amount used each month varies. These will only appear if you have agreed to them.
Fun activities to help explain bank statements to your kids
The quicker your child gets used to bank statements and what they are for, the faster they will incorporate them into their financial lives. One way to do this is to come up with some fun activities that highlight what bank statements are for.
Create a bank statement treasure game. Print off (or create your own) bank statement and give your child a list of 10 things they have to find on the statement in 10 minutes.
Play ‘find the mistake’. Create your own bank statement for your child but make ten mistakes and then ask them to find them. They could be things like spelling their name wrong, showing a pocket money deposit as a debit, listing a purchase overseas or a huge withdrawal at an ATM machine.
Use the statement as a maths game. Get them to start with a balance and ask them to subtract all the outgoings for two weeks and tell you the balance.
Show them how to shred old bank statements. This is a fun and good lesson about how to destroy official documents and not just bin them.
Get your child a GoHenry prepaid debit card for kids. This is a fun way for your child to learn about bank statements. They can get their pocket money paid into their account and track the money they earn from chores or other jobs as well as monitoring their spend.
Use Money Missions on the GoHenry app. Money Missions are designed to make financial education fun, building confidence, literacy, and curiosity in 6-18-year-olds. They can be accessed via the GoHenry app and cover money basics, earning, saving, budgeting, and responsible spending.