England’s secondary school curriculum was modified in 2014 to include financial education and as of 2016, 90% of schools were delivering these classes. Does this mean the problem of financially educating youngsters is solved? Not quite.
In a survey, a huge 66% of teachers admitted that the standard of financial education 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.
Financial education’s position within the wider curriculum and a lack of teacher training has been held accountable for the performance of the new addition to the teaching programme.
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.
It’s not just the responsibility of teachers to educate children financially. 80% of parents believe it is their responsibility to teach their children about finances — yet one in six doesn’t feel confident doing so. With this in mind, personal pension provider, True Potential, has provided the following tips to educating children financially throughout their life.
Educate them early
As outlined by The Money Advice Service, your child’s financial attitude will be decided once they’re seven years old. It’s important that you start talking to them about money and what it means early.
- Let your child count out the money you need for a purchase. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Put your child in the shopper’s shoes by letting them pay the cashier. This will educate them about the exchange transaction.
- Use play to enhance their skills. Many children will like to play shop, which will again help them better understand money and value while still having fun.
Outlining essential and non-essential spending
Needs and wants are two separate things that most children don’t fully understand — this includes the cost of what they’re asking for.
- You don’t have to say yes to buying 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.
- Real-life examples can outline the scale of the cost for older children. 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.
Working towards savings goals
Don’t overlook the importance of teaching your child about 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.
- Explain to your child they have three options with their money; spending, saving and donating. Giving them three jars or piggy banks is probably one of the easiest ways of giving them control and visibility of this, so they can see a clear divide of 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.
Financially responsible for life
As they move on from school and into college and university, they’ll rely on the finance skills you’ve taught them more than ever before. As a parent, you’ll need to:
- Give them the space 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.
- Support their work ethic with regular encouragement and praise. Earning on their own is one of the best ways to understand the value of money.
- Ensure they have the knowledge to remain financially responsible during university, where they may be living alone or away from home. 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.
Want to 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, establishing three free personal finance courses to help improve financial confidence across the UK.