Empowering the Next Generation: Teaching Kids about Money

Teaching kids about money from a young age lays the foundation for a future where they can confidently manage their finances, make informed decisions, and increase their chances of reaching financial independence. Despite financial literacy being a life skill that impacts every aspect of our lives, there is currently no compulsory financial education in UK schools. In fact, Britain is falling behind the legal requirement for teaching financial education in schools. A 2023 survey by the UK Money & Pensions Service has found that only 47% of children say they recall receiving any kind of meaningful financial education at school, and this number hasn’t changed in the last three years. This means that many young adults leave home and enter the world without even a basic understanding of personal finance. This article delves into the importance of imparting financial knowledge to children and offers practical guidance on instilling these crucial life skills in the next generation.

Why should we teach kids about money?

Teaching kids about money is vital for several reasons:?

• Life-changing skills: By the tender age of 7, children have already developed many of the beliefs and habits that will drive their relationship to money in adulthood. Therefore, early financial education forms the foundation for a lifetime of financial well-being. Children who learn about money management at a young age are more likely to make sound financial decisions as adults and have a much more positive relationship with money.?

• Higher earning power: Research has shown that children who receive financial education earn more as adults and have a richer retirement.?

• Lower risk of debt: With 13 million adults struggling to pay their bills in the UK, teaching children about debt is more important than ever. Financial literacy helps kids understand the consequences of debt and the importance of responsible borrowing. It equips them with the knowledge to avoid the debt traps that can hinder their financial progress.

• Building savings & responsible spending: Studies show that children who have received financial education feel more confident with managing their money and save up more frequently. Kids who grasp the concept of saving are more likely to develop a lifelong savings habit, and learning how to save and invest wisely can set them up for future financial security. Financially literate children are also more likely to understand the value of money and are more likely to make thoughtful spending choices.?

How can we effectively teach children about money?

Leading by example is one of the most powerful ways we can effectively empower children when it comes to money. A study by Cambridge University highlighted how much children learn through absorbing their parents behaviours and attitudes toward money. This means that parents must be aware of what they are modelling for their children. As a parent, brushing up on your own financial literacy and being aware of your own negative money habits is an excellent place to start to ensure that your children are picking up positive habits and behaviours.??

There are also some great tools now available to parents thanks to FinTech innovations. For example, Revolut has introduced its Junior account for 6-17 year olds. This encourages young people to start saving money and learn how to responsibly manage their own money. CapCo’s “MyBnk'' is an app that teaches 5-11 year olds various personal finance skills including how to effectively budget, track their spending habits and the importance of delayed gratification. There is also the Go Henry app that allows parents to pay their kids for chores and customise debt cards so that kids can learn to responsibly spend their money.

Financial education has been found to be particularly effective if it coincides with an opportunity for the young person to put it into practice, so use of these tools is highly encouraged.?

Schools also have an important role to play when it comes to empowering the next generation about money. With so much evidence demonstrating how virtual early and life-long financial education is, an improved school curriculum would have a hugely positive impact.?

Conclusion

Teaching kids about money is an investment in their future. It equips them with the tools they need to navigate the complex financial landscape, make informed choices, and achieve their financial goals. By starting early, making learning enjoyable, and engaging with schools and communities, we can empower the next generation to become financially savvy individuals capable of securing their financial well-being. In doing so, we help them build a brighter, more financially secure future.

Key Takeaways?

• Teaching children about money at a young age is crucial to help them develop financial management skills, make informed choices, and increase their chances of achieving financial independence.

• Despite the importance of financial literacy, there is currently no mandatory financial education in UK schools, and the country lags behind legal requirements for teaching financial education.

• Early financial education provides life-changing skills, as children develop money-related beliefs and habits by age 7. It sets the foundation for responsible financial decisions and positive money relationships in adulthood.

• Financially literate children have a higher earning potential, are less likely to fall into debt traps, and develop healthy savings and spending habits.

• Effective methods to teach children about money include leading by example, using FinTech tools like Revolut Junior and MyBnk, and advocating for improved financial education in schools to empower the next generation for financial success.