England’s secondary school curriculum was adapted in 2014 to incorporate financial education. By 2016, The Money Charity found that 90% of schools were educating pupils about money. While this was a step forward in improving financial education for children and school-leavers, the problem was far from solved.
Regarding the quality of education delivered, a survey found that 66% of teachers rated it 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.
This negative perception is attributed to a mix of financial education’s position within the wider curriculum, as well as a lack of training for teachers themselves.
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.
Teachers and parents are responsible for helping educate children financially — yet one in six parents 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.
Educating them early
By the time they reach seven, The Money Advice Service advises that your child’s financial attitude will already have been determined. It’s important that you start talking to them about money and what it means early.
- Get them to help count your cash. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Educate them about the exchange transaction by allowing them to hand the cash to the cashier.
- Use play to educate them. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
When spending is essential vs. when it’s not
Your child will likely have a wish list as long as their arm — but how much of it do they actually need? Do they truly understand the cost of what they’re asking for?
- Don’t always give in to your child and buy them what they want. 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.
- Use real-life equivalents to educate 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.
Saving, as well as spending
It’s really important to teach your child about saving, as well as spending. 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.
- You can teach your child about money management by encouraging them 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.
Financially prepared for life
If they’re not prepared, transitioning from school to the financial responsibilities that come with college and university can be difficult. 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.
- Drive their work ethic. Earning on their own is one of the best ways to understand the value of money.
- Give them the skills they need to remain financially responsible as a student. 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.
Leading by example can help you educate your children and show them first-hand the benefits of being financially responsible. 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.