Financial education is important at any age, ensuring informed decisions are made about money. To start this education at a young age, financial education was included into the secondary school curriculum in England in 2014.
Yet, two years later in 2016, a survey by The Money Charity has found that although 90% of schools were delivering this education, 66% of teachers thought it was 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.
Whether it’s through an overlooked position within the curriculum more widely or a lack of teacher training, how is this outlook impacting financial education in the UK? 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.
To help instil this financial responsibility and strengthen the education delivered, personal pension provider True Potential Investor has provided the following advice. The firm is well-placed, as its 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.
An early start
How your child views money will be determined by the age of seven, according to the Money Advice Service. It’s important that you start talking to them about money and what it means early.
- Let your child count out the correct cash to pay for an item. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Give them the cash to hand to the cashier to illustrate the exchange transaction.
- Use play to educate. 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
Needs and wants are two very different things, yet your child may struggle to see the difference, asking for expensive items without really understanding the costs.
- It’s okay to say no to expensive items. 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.
- If you have older children, use a real-life example to illustrate the scale of what they’re 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 goals and achieving them
As well as spending, you should also educate your children around saving. 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.
- Spending, saving and donating is a good way of dividing your child’s cash, teaching them about money management and responsibility. 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.
Skills for life
As your teens transition to college and university, financial responsibility steps up a notch. As a parent, you’ll need to prepare them the best way you can:
- Understand that making financial mistakes is a part of growing up. 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.
- Encourage their work ethic. Earning on their own is one of the best ways to understand the value of money.
- Give them the knowledge they need to remain financially responsible. 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.
Take the above tips on board and instil financial responsibility in your children from a young age and watch as they develop into financially responsible adults.