The secondary school curriculum was updated in 2014 to include financial education. Although a step in the right direction, with The Money Charity finding that 90% of schools in 2016 were delivering this education, 66% of teachers said it was either somewhat or very inefficient.
In fact, three out of five teachers said that the curriculum change had no impact and worryingly, a third of teachers didn’t know financial education was on the curriculum.
So what effect is this 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.
Responsibility for the financial education of children and young people doesn’t just lie with teachers though—parents also have a role to play. Take a look at the following tips provided by pension transfers provider True Potential Investor around how to financially educate your children.
Educate when they’re young
Believe it or not, your child’s attitude to money will be determined by the time they’re seven, The Money Advice Service advises. It’s important that you start talking to them about money and what it means early.
- Encourage your child to count out your cash when you’re purchasing something. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Give your child the money to give to the cashier to illustrate the exchange transaction.
- Facilitate education through play. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
Define spending as essential and non-essential
Often, your child’s wish list will feature items that they don’t necessarily need, just want. And they usually don’t understand the scale of the cost of what they want.
- Don’t feel like you have to buy your child everything they ask for. 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.
- Older children will benefit from explaining costs using an equivalent example. 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
Saving is equally important as spending, especially when it comes to raising financially responsible children. 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.
- Let them divide their money across three categories; 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.
Skills they’ll use
When your children move onto college and university from school, they’ll naturally become more responsible for their own finances. As a parent, you’ll need to prepare them the best way you can:
- Understand that mistakes will be made. 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.
- Support them at each stage of their career. Earning on their own is one of the best ways to understand the value of money.
- Give them the skills they need for student life. 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.
A financially aware child develops into a financially responsible adult. Take the time now to educate your children and you can both reap the benefits in the future.