Financial education was made compulsory in England through its incorporation into the school curriculum. While this was a step forward in improving financial education for children and school-leavers, the problem was far from resolved.
In 2016, The Money Charity found that 90% of schools had incorporated financial education into their teaching delivery programmes. While uptake figures are pleasing, the quality of the education delivered tells a different story.
When asked about the quality of financial education delivered in schools, 66% of teachers believed it was either somewhat or very ineffective. In fact, three out of five teachers said the curriculum change had no impact and worryingly, a third of teachers didn’t know financial education was on the curriculum. This is largely attributed to the subject’s inferior position amongst the wider curriculum and a lack of teacher training in place.
What is the impact of these financial education shortcomings? Research from The Money Advice Service has found that children aged 12 to 17 whose parents made their spending decisions for them were more likely to spend unnecessarily and have poorer money management skills.
With the need for strong financial education evident, parents and teachers need to do all they can to educate their children early about financial responsibility. Despite 80% of parents believing it is their responsibility to teach their children about finances, one in six don’t feel confident doing so. The following has been provided by stocks and shares ISA specialist, True Potential Investor to offer advice and guidance on educating children about money.
Financial education at a young age
The Money Advice Service advises that by the age of seven, your child’s financial outlook will be decided. It’s important that you start talking to them about money and what it means early.
When paying for something, ask your child to help count out your money. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
Educate them about the exchange transaction by allow your child to hand the money to the cashier.
Play can be educational. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
Essential vs. non-essential spending
What a child wants and what a child needs are usually very different. Often, a child doesn’t understand the value or price of what they’re asking for.
Don’t be afraid to say no. Encouraging your child to save up for something they want rather than you buying it for them will help your child understand the value of money and delayed gratification.
With older children, use real-life terms to explain the cost of what they are asking for. For example, is a £300 games console enough to cover the family’s monthly food shop? This perspective can help children realise the difference between what they want and what they need, and realise that they can’t always have everything.
Setting savings goals
You should try to educate your children on saving, as well as spending. If they start saving towards a games console or other item, encourage them to budget with the money they have. This is applicable whatever the age of your child, whether they’re dealing with pocket money or wages from their first job.
Explain about the benefits of splitting their money across spending, saving and donating. Giving them three jars or piggy banks is probably one of the easiest ways of doing so, so they can see a clear divide in their money. For older children, this can be done through having a separate current account to their savings account, while you may want to give younger children their pocket money in lower denominations so it can be easily split.
Life skills for teens
As they move to college and university and become more financially responsible, it’s crucial that, as a parent, you prepare them the best way you can:
Let them learn from their mistakes. As they get their first job and start earning money for themselves, they may be tempted to splurge with their first wage, leaving them short for the rest of the week or month. You can disagree with their purchases, but try not to be too controlling over how they spend their cash. Eventually, when they’re tired of being skint for the majority of the month, they’ll realise the importance of budgeting and will consider a purchase more before buying it.
Even when they’ve had a tough shift, always encourage your child to keep working. Earning on their own is one of the best ways to understand the value of money.
Educate your child about financial responsibility before they move out for university. When the student budget is limited, it’s very easy to turn to credit cards with a high APR. Make sure they understand the options available to them as a student and encourage them to choose the best ones.
Evidently, educating your children around financial responsibility is important from a young age and one of the best ways of doing so is leading by example. True Potential Investor’s parent company, True Potential LLP, has partnered with the Open University to establish the True Potential Centre for the Public Understanding of Finance, establishing three free personal finance courses to help improve financial confidence across the UK. More information can be found here.