Did your parents ever sit down with you to discuss how to write a cheque or how a credit card works? Did anyone ever explain loans and interest to you? How about budgeting and savings?
The global economy is always evolving, and over the last few years there’s been a significant increase in financial insecurity, with an estimated 8.3 million Britons in debt and 22% without any savings.
Although this can be attributed to global trends such as wage stagnation, increased living costs and predatory lending, we should also start talking to young people about their financial futures so they can be better prepared for adulthood.
The Money and Pensions Service (MaPS) has identified four key points that improve children’s financial literacy:
- Start early
- Put learning into practice
- Make the most of everyday events
- Parents and carers should be involved
Though financial literacy is starting to be introduced as part of school curriculums, it’s important for parents to encourage children to take an interest in their financial futures as well.
It can be tricky to find the right tone when talking to young people about money. Be honest with yourself, when you were learning about finances in school or from your parents, didn’t you find it all a little boring? Maybe a tad condescending? Was there any part of you that wondered what the point was since you were sure you’d never have financial worries?
A study from Beano Studios published in 2020 confirms that only 27% of children enjoy learning about money in school. The children surveyed reported that more jokes, games, “funny stuff” and using real money in real situations would make learning about finances more fun.
Here are some suggestions for engaging your children:
- Keep it age appropriate. For younger children, this may mean starting with saving and spending with pocket money. With older children, financial education should probably be a bit more comprehensive.
- Discuss options and repercussions using real life examples:
- What happens if you buy something you can’t afford on credit? (Make sure to include buy now pay later services like Klarna in this discussion)
- How about giving your child a shopping list and the cash to do the food shop this week (with you supervising, of course)? What can they learn about cost, sales, and brand choices?
- Introduce rewards and goals. What might your child look forward to buying themselves?
- Make it fun: apps and games. There are lots of digital resources and options available, but these are some of our favourite apps for children:
- Go Henry– One of the most popular money apps for children right now. For £2.99 a month, you can supervise your child’s learning about money through pocket money, spending, and tracking. They get an account which you (the parent) pay into, along with a card that can be used in shops, online, or to withdraw cash – but you’ll be notified every time they spend so you can monitor their progress.
- Rooster Money– A free app based on you giving your children cash – but it allows you both to track how much is “owed” as part of their monthly allowance or as payment for chores completed – or whatever arrangement you may have in place. Children get a monthly statement, can track their spending/savings, and can even add photos of their goals.
- Gimi – Another free option that allows you to set up regular payments for pocket money and set rewards for specific tasks. Crucially, there are also three sets of financial lessons within the app with accompanying videos and discussion topics.
- Bankaroo – Free, but with additional costs for extra features, this app was actually developed by an 11-year-old (with help from her father), and built specifically to help children learn about interest, savings, and negative balances. Paid extras even allow children to set up multiple accounts to transfer money to siblings and friends with the app.
- iAllowance – £2.99 allows you to set up unlimited accounts for your children, so they can have separate “piggy banks” depending on certain goals, savings, or tasks. The app also lets you “prod” children to finish tasks and earn their pocket money.
However you decide to start teaching your children about money, we think the most important areas for young people to understand in order to be financially confident are:
- Budgeting: How to build one and how to stick to it
- Why is budgeting important?
- How can you plan for goals like a holiday by adjusting your monthly spending?
- What if you want a larger monthly expense like a gym membership?
- Coupons and discounts
- Where can you find these and how do you tell what a good deal is? Just because you can get something at a lower price than usual doesn’t mean you should necessarily buy it…
- Financial products: bank accounts, credit cards, and loans
- What’s the difference and how do they work?
- What is interest and how is it added to monthly payments?
- How do different products impact your credit score and what does that mean for your future?
- Savings and Investments
- What’s the point in saving when you’re young?
- What kind of savings accounts will accrue interest?
- What are stocks and bonds, and how do they work?
- Are they worth investing in?
- What other options are there?
Managing your money effectively and understanding the impact your finances can have on every aspect of your life, both good and bad. Find out more about how to improve your own financial wellbeing here.