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Teaching kids for a financially-savvy future

Posted in: Family Last updated: 27 Feb 2013

We teach our children to read and write, add and subtract, learn foreign languages, and even discuss the awkward issue of sex. But when it comes to learning how to look after their money, our education system has fallen short.

Financial education and National Curriculum

Just how are our teenagers expected to know how to manage their money both during their childhood, and more importantly, into adulthood?

Up until very recently it has fallen on parents' shoulders entirely to pass on good money management – and this relies on the assumption they know it themselves! However, after much lobbying and campaigning, the financial education charity pfeg (Personal Finance Education Group), among others, has helped secure a place for financial education on the National Curriculum for the first time. It means that in future, financial education will sit in both mathematics and citizenship.

Managing finances

Managing finances is under the spotlight more than ever before – both on a personal and on a national level. So it is high time these skills were included in school and they'll cover the importance of personal budgeting, financial products and services (key stage 3) and more detail on  wages, tax, credit and debit (key stage 4).

I've written before about how important I think pocket money is to help teach young children how to save, even if it is dealing in only 50p or £1 increments. As children become teenagers this pocket money might progress to an allowance or some form of wages. When they do, those skills of saving and budgeting so they can pay for their mobile top up cards or a trip to the cinema, become even more pertinent.

"...with the right advice and teaching on financial products, teenagers could be much better equipped to deal with potential financial problems."

Research into financial literacy

As with so many things to do with teenagers, there is invariably an assumption that they will do the wrong thing, that they are rash with their cash and incapable of making sagacious choices. But this does them a disservice.

Research among more than 2,300 14 - 16 year olds into their financial literacy (done in conjunction with Magnified Learning) threw up some interesting findings. For example, when asked what they would do with a £10,000 gift from their parents almost a third said they would save it; 22% said they'd spend half and save half and 7% said they'd invest it. True, 38% said they'd spend it all, but for a group of 14 - 16 year olds, I think this shows there are a significant percentage of financially savvy ones. And when asked what they would spend it on, 33% said a car, but 18% said toward university which some may argue is an investment anyway.

Equipping teenagers

More interesting still, the research also involved a workshop on financial literacy and this highlighted how, with the right advice and teaching on financial products, teenagers could be much better equipped to deal with potential financial problems. At the start of the workshop when asked how they would borrow money there was a considerable mix: 39% said a bank loan, 20% a bank overdraft, 15% a payday loan, 12% a credit card, 12% a credit union, and 2% with a loan shark.

By the end of the workshop, when the mechanisms of these various loans had been better explained, the shift was amazing. 90% said they'd use a bank loan, with 6% saying a credit union, 2% a credit card, and 2% a bank overdraft.

Give kids the right tools and accurate information, and they are put in a much stronger position to make the right choices. It's always a dilemma for parents when saving for their kids to know how much control to maintain on the money. Should it all be handed over to them with no-strings attached when they turn 18 or drip fed with strict conditions attached? This is just one of the many dilemmas faced in a lifetime of parenting but from this research at least, it looks like we should educate our children on their finances, and then maybe have faith that they are capable of making sensible decisions...some of the time at least!

Written by Jane Bainbridge

Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial adviser about your own circumstances.