International Women's Day | Sharing the gift of financial education

Unlike findings in most other countries Irish women are 15% ahead of men when it comes to being financially savvy - Mark Coan at moneysherpa .?

As part of International Women's Day this year, I would like to shed light on the importance of sharing the gift of financial education within our communities, with a particular focus on children. Women have a fantastic opportunity to shift the narrative for future generations if we commit to action within our communities. With our financial wellbeing and mental health so closely linked, having financial education early in life is critical to both mental welfare and economic stability.?

8% of people in Ireland have access to financial education in schools and as a result, it is normal to learn from family or friends who, more often than not, are not financial experts, exposing children to picking up bad money habits from an early age. Along with this, in the 2022 Parents, Kids and Money Survey it was revealed that 40% of parents would rather their children take a financial education class versus teaching them about money matters themselves. Teachers often lack confidence when it comes to talking about personal finance with children given its complexity and? ‘taboo’ status; however, data suggests the need for children to develop their personal finance knowledge at a young age. Working in financial wellbeing, along with my lack of financial education in school and given ‘financial literacy in Ireland is almost 20% lower than in other Northern European countries ’, I feel passionate about sharing financial education.

With that being said, as I spent time back home over the festive period, I had the opportunity to observe my wonderful niece’s gift-giving and valuing behaviours. This year, we decided to carry out an exercise with my niece which meant in order for her to receive the four toys she wanted for Christmas, she would have to select four of her current toys to give away to other children for their Christmas. This proved to be incredibly powerful and over a period of time, she was able to think about which toys meant the most to her and understand her attitude towards giving.

The Bluetree saving family finance blog is a wonderful resource for understanding key milestones for children's development when it comes to money matters with some key highlights and actions below:

Three to four years old

• Children are extremely curious and begin to pick things up, investigate and play with them.?
• This is a perfect age to begin teaching children the basics about where the money comes from. For example, when a child asks why you have to go to work, let them know that in exchange for work, you would receive money that you can use to buy toys.?
• The value of numbers is also an important part to understand at this age. Whether it’s real money or money taken from a board game, explain how much they will need to buy their favourite toys, or perhaps how much for the family to go on a trip somewhere. By seeing numbers and banknotes, and giving them an equivalence, children will begin to realise that some purchases cost more than others.

Five to six years old

• Children begin to pay attention for longer whilst also developing an understanding of numbers, moving away from ‘playing’ and towards ‘money management’ for example, saving for a new toy.?
• This is a stage where you can begin to avoid instant gratification and as we experimented this year with my niece, it is important for them to understand that if they want X and Y they will have to go without Z. Depending on what the child wants, you could give them a certain level of autonomy to choose their options and what they’re prepared to go without, helping them to value things better.?
• Pocket money is another good thing to incorporate at this stage. Giving a child a certain amount either weekly or monthly helps teach them how to manage money from a fixed regular income. Having open discussions on the opportunity for the child to purchase something they would like with their money, stressing the importance of saving for larger purchases.?

Seven to eight years old?

• Children have begun to form life-long attitudes toward saving and spending. Helping a child discover and achieve their wants through earning money and putting it away is important at this age.?
• This is the stage where children might recognise the opportunity that lies ahead of them and begin to understand more about their future. Firefighter, doctor or astronaut; for many children it’s an age when they dream of what they want to be when they grow up.
• Helping to understand the relationship between earning a wage and spending, by talking about the household budget and how you need to keep expenditure at a level below what you earn.

Children learn money habits by watching. As a parent or guardian, being aware of this during a transactional process is crucial to ingrain good spending habits. Getting children familiar with money through things like trade-offs on time for money (chores), entrepreneurial endeavours in terms of earning money, short-term vs longer-term thinking, and understanding the impact of compound interest is essential.

‘Invisible money’ - physical vs digital money

In the US Parents, Kids and Money Survey , 73% of parents agree that because of digital transactions, kids think of money differently than they did when they were growing up. In the world we live in today, it is increasingly rare that we would carry out a payment in the form of physical money and as a result, it makes it harder for children to get their heads around what things cost and how money works. Dan Britton wrote a fantastic article a few years ago on this and pointed out that using phrases like “tap and go” or popping down to the “hole in the wall” can have a negative impact on the way children value money and understand how money comes and goes. The Bank of Ireland carried out research which uncovered that 7/10 children think money from an ATM is free. Providing them with a visual representation of how currency works prior and slowly introducing them to digital and credit purchases in line with the key milestones mentioned above would be a great way to develop their relationship with money.?

Driving action for children

The Bank Of England has collaborated with Beano and Tes to develop financial education resources for primary schools in the UK over the last two years. These resources include 12 lessons that will introduce children between the ages of 5 and 11 to the basics of how money and how the economy works. This will sit within the Personal, Social, Health and Economic curriculum in the UK. Andrew Bailey, Governor of the Bank of England, said:?

“Financial literacy is essential for everyone. The Bank’s education programme is central to our role in equipping the public with sufficient financial and economic knowledge for their daily lives. We are delighted to partner with Beano and Tes on the new Money and Me resource, which will take our programme into primary schools. It will support teachers in giving young people a strong sense of the importance of economic and financial decisions from an early age.”?

More countries and governments should recognise the importance of providing education and resources for children.?

The behavioural impact a financial crisis has on children

As we enter the dreaded recession, children are particularly vulnerable as they undergo critical developmental transitions yet do not have equitable access to financial education to understand the fundamentals behind what is happening. It is rare for parents to have open and transparent conversations with their children about the situation, rather, they often show a scarcity mindset.?

Scarcity and fear-mongering are what spring to mind when I think about the news and media during challenging periods, for example, the pandemic and previous recession. How can we switch the narrative to an opportunity to learn financial resilience and prevent children from fearing the worst?

Will Rainey ????♂? (founder of Bluetree Savings and author of Grandpa’s Fortune Fables) is a fantastic advocate for educating children about money and encourages parents to get their children to think of money like seeds. If they plant some of their seeds (invest), over time they will grow into trees and produce more seeds. At the beginning of 2023, Will recommended parents change their children's financial futures by following the ‘3 Rules of Wealth’:

1. Save 10% of all the money they receive?
2. Invest what they save?
3. Have patience

Sharing the gift of financial education:?

Having the ability to share content from nudge with up to five friends or family at no additional cost, is incredibly powerful to me. Sharing tips on topics such as: ‘talking to your children about money’ or ‘how to talk to your children about inflation’, with my brother (who has a child). Or knowing my friend is trying to get on the housing ladder and sharing a ‘beginners mortgage guide’ to help her thrive during that process. Supporting and creating impact in the communities is a really important part of our mission and something I take great pride in, especially as I navigate critical milestones that will impact my loved ones and my financial situation.?

In the spirit of sharing, I encourage you to take a look at this year's global financial well-being calendar , along with the latest global financial wellbeing research, launching mid-March, and share it with your community. For International Women’s Day this year, given the lack of financial education in schools (particularly in Ireland), I commit to modelling good money habits to children in my family and my broader community. Finance is the one thing that touches all of our lives, why not share the knowledge, skills and education with our own communities and make the world a more equitable place??

References:

https://moneysherpa.ie/financial-literacy-survey-data/

https://nudge-global.com/disrupting-money-habits/ ?

https://www.bluetreesavings.com/ ?

https://nudgeglobal-uk.nudgeglobaldemo.com/Contents/1059a3de-8ff7-40c9-b07a-2e5ed9bdb071/74546af3-0bdd-4780-b904-f588ecb81608 ?

https://assets.publishing.service.gov.uk/media/57a08b1740f0b64974000970/60828_Youth-Evidence-Review-Final.pdf

https://www.bankofengland.co.uk/news/2020/june/boe-beano-tes-launch-new-primary-school-teaching-resource

https://www.forbes.com/advisor/personal-finance/how-to-teach-your-kids-good-money-habits/

https://insights.nudge-global.com/hubfs/2023%20Global%20financial%20wellbeing%20calendar/nudge%202023%20Global%20financial%20wellbeing%20calendar.pdf