Research has shown that teaching children about money when they are young, is likely to lead to a better understanding of savings and the ability to delay gratification in order to meet a long-term savings goal (Source: MyBnk).
How does early learning help children to manage money?
According to the research, seven-to-11-year olds who have received lessons in saving money and working toward long-term goals, are better able to understand financial decisions and the consequences they will have. Furthermore, many children displayed increased ability to:
- Delay gratification (68%)
- Actively save for something they want (70%)
- Understand savings-related words, including ‘habit’ and ‘budget’ (55%)
91% of teachers say that children who receive financial education are more likely to grasp the concept of the ‘cost of living’.
What does that mean for you and your children?
Personal finance education is not part of the curriculum in most schools, meaning that many children leave compulsory education with little-to-no money management skills. That can lead to difficulties when they enter the world of work and need to budget in order to live a stable lifestyle.
Due to the lack of financial education available for children of all ages, it is left to parents, carers and guardians to make sure that their children are equipped to manage their finances when they need to.
Ideas for teaching children about finances
We know how hard it can be to get kids engaged in learning, especially if you are trying to teach them extra skills on top of their already-demanding school schedule. The key is to introduce the subject gradually and make it part of everyday life, rather than a chore which has a scheduled time for practice.
For example, you may wish to try:
Using pocket money to give your children a practical approach toward real-world problems they may encounter
If your child already has a steady income; such as the money you give them each week or month to support their sweet tooth or gaming habit, it may be worth considering using this as a base for some personal finance practice. This could include having them create a budget for the things they plan to buy or creating a financial plan which sees them saving a portion of their ‘income’ which can be used to make a big purchase at a later date.
Introducing a real savings goal for your child to work toward
Whether it’s the latest must-have toy or gadget, or something special they have seen in a shop window, use that as an incentive to save a little of their own money every time they receive some. They can then use these savings to buy the item and reach their goal.
When taking this approach, it is important to let other family members know what is happening, as we all know how grandmas can be when their angel wants something!
Letting your child ‘take charge’ when carrying out financial activities
If you are opening a bank or savings account on behalf of your child, it may be worth letting them do some of the talking. Of course, this will depend on their age and ability to understand what is happening, but even something simple like letting them say their own name or tell the assistant their date of birth will increase their confidence around professionals and hopefully make it easier for them to engage with financial services as an adult.
Introduce a system where your children ‘earn’ their pocket money through completing chores or meeting personal targets
If you currently give your child money for no reason, consider developing a system where they can earn money through carrying out tasks or helping around the house. You may even want to introduce bonuses for good weeks and penalties for misbehaviour. This will help your child to learn about the world of work and how doing well can be rewarded in a company environment.
How we can help
As financial advisers, we aim to give you the benefit of our expertise, experience and qualifications to encourage your own abilities to make financial decisions which are supported by the information and knowledge you have gained from working with us.
In turn, we hope that those skills and increased confidence can be passed on to your children and that your whole family will benefit from working with us.
For more information, or to talk to us about your own finances, contact Sarah or Bev on 0115 933 8433.