2014 saw a huge step forward in how we educate our children about money, as financial education was finally added to England’s secondary school curriculum. Yet the problem was far from solved—as personal pension account providers True Potential Investor explores:
As of 2016, 90% of schools were delivering financial education, as found by The Money Charity. While uptake figures are pleasing, the quality of the education delivered tells a different story.
A survey was carried out to establish the opinions of teachers regarding financial education. 66% of said money education in schools 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.
Many have pointed the finger at a mixture of factors in response to the less than ideal delivery of financial education, from its position within the wider curriculum to a lack of training for teachers.
But what impact 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.
The need for strong financial education delivered by teachers and parents is clear, yet one in six parents don’t feel confident doing so. The following tips and advice are provided to help parents educate their children at each stage of their life.
An Early Start
By the time they reach seven, your child’s financial attitude will already be determined, according to the money advice service. It’s important that you start talking to them about money and what it means early.
- Let them help you count out the cash you need to buy something. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Giving your child the money to hand to the cashier will educate them about the exchange transaction.
- Use play to teach them about money. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
What they need vs. what they want
Many children won’t fully understand the value or cost of what they’re asking for — and there are some tactics you can use to make this clear to them.
- It’s okay to say no to your child rather than giving in and buying them it. 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.
- Convert what older children are asking for into 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.
Identifying Savings Goals
In addition to their spending attitudes, you should also try to influence your child’s attitude to 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.
- Splitting their money across spending, saving and donating can be beneficial for your child. 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
There’s a big leap between going to school and becoming more financial responsible as your child moves onto college and university. As a parent, you’ll need to prepare them the best way you can:
- Understand that they will make 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.
- Support your child’s attitude to work. Earning on their own is one of the best ways to understand the value of money.
- Equip your child for flying the nest for university by giving them the knowledge they need to be 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.
Financial education is at the heart of preparing your child for later life. To help you lead 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. They have established three free personal finance courses to help improve financial confidence across the UK.