In 2014, financial education was included into England’s secondary school curriculum. While this was a step forward in improving financial education for children and school-leavers, the problem was far from solved.
According to research carried out by The Money Charity in 2016, 90% of schools were delivering financial education. While uptake figures are pleasing, the quality of the education delivered tells a different story.
66% of teachers surveyed thought the financial education delivered 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.
A mixture of factors is held responsible for this poor outlook on the UK’s financial education, from its position within the wider curriculum to a lack of training for teachers.
What impact is a lack of financial education and responsibility having? 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.
Clearly, young people need strong financial education and hands-on experience of managing their money — and part of this responsibility lies with parents, not just teachers. 80% of parents believe it is their responsibility to teach their children about finances — yet one in six don’t feel confident doing so.
To help, stocks and shares ISA provider and investment specialist, True Potential Investor, has provided the following tips for teaching your children about finances and how they can be more responsible with their money.
Start their financial education early
According to The Money Advice Service, your child’s attitude to money will be determined by the time they reach the age of seven. It’s important that you start talking to them about money and what it means early.
- Ask your child to help you count your cash to pay for something. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Allow your child to pay the cashier to educate them about the exchange transaction.
- Teach them through play. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
Underline the difference between essential and non-essential spending
There’s a difference between what your child wants and what they actually need — and often, children don’t understand the cost of what they are asking for.
- If your child asks you for a new toy or item of clothing, saying no isn’t necessarily a bad thing. 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.
- For older children, explain the cost of what they’re asking for in real-life terms. 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.
Help them identify goals and work towards them
As we’ve mentioned above, you can not only influence your child’s attitude to spending but also 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.
- Encourage your child to split 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.
Teach teens what they’ll need
It can be difficult for teens to transition between attending school and becoming more financially responsibly as they move onto college and university. As a parent, you’ll need to prepare them the best way you can:
- Allow them to make their own 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.
- Encourage your child to keep working. Earning on their own is one of the best ways to understand the value of money.
- If your child is flying the nest for university, make sure they have 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.
By instilling financial responsibility into your children from a young age, you can better prepare them for managing their money in later life.
Of course, one of the best ways of doing so is through 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.