What do parents teach their kids about sustainable investing?

As you may have heard, financial education for women and young people is very close to my heart, especially when it comes to making money matter for the greater good of the planet. Besides the fact that the never-ending list of gender finance gaps actually starts with a pocket money gap, Cambridge University also found that many of our money beliefs and values are formed in childhood, as early as the age of three!

This all means that the behaviour we display as adults, and what we teach our kids, is pivotal for their financial confidence. It can even be the determining factor as to whether they become the next generation of responsible investors or not.

So what is it that today's parents teach their children about money? What would help parents be better 'financial parents'? What money values are being passed on to the next generation? And how do children feel about financial education?

The SmartPurse team and I struggled to find the answers to all of these questions, so instead we went on a journey to find them ourselves. We asked over 250 UK parents about their money habits and how this impacts their children. Our new report, Invest in their Future: A Snapshot of Financial Parenting in the UK, will come out tomorrow, but as the findings are quite revealing and might reach far beyond the UK, I cannot resist sharing some of the key conclusions here today! :)

What is financial parenting?

Financial parenting is how we teach our children about money, and throughout this report, I kept returning to three baseline factors that influence this parenting, which are:

• Financial knowledge
• Financial experience
• Financial confidence

To me, the best money mindset and management styles use all three of these factors in tandem. When it comes to sustainable investing, our new SmartPurse research has shown that issues and difficulties tend to arise when one or more of these factors are not being met.

How do parents invest (and do they invest sustainably)?

Having worked in finance for well over a decade, and specialising in sustainable investments, I have seen, time and time again, the evidence towards the profitability and value of sustainable investing. That's why one of my biggest personal takeaways from this report is how much parents are still suffering from a lack of financial education. This appears to be one of the major points preventing parents not just from investing sustainably, but investing at all.

The conclusion our report has reached on parents and sustainability is that, while it is not 'unpopular', sustainable investing is not the norm amongst UK parents (yet). However, with improved financial education and confidence, it could be.

The two graphs below show some of the SmartPurse data we collected, including the percentage of parents who have an investment portfolio (32.53%), and the percentage who use their portfolios to invest sustainably (57.89%).

One thing that I'm always interested in is what particular areas of sustainable investing people are drawn to. In past issues of Money's Impact, I've spoken about emerging trends in sustainable finance, and more recently, how certain values can be more profitable than others. To continue this research, SmartPurse asked which of the ESG values parents most often invest in.

The results weren't all that surprising to me, and I don't think they will be for any of you, either. With climate change set to remain a pivotal economic focus for at least the next few decades, it makes sense that parents are especially concerned about making sure that their children actually have a future to grow up in.

To find out why people might not sustainably invest, we asked if parents would switch to impactful funds if they knew this would bring more profit. 93.75% said 'Yes'.

Sustainable investing has already proven its profitability, and this proves my point: a lack of transparent financial education and communication is restricting opportunities for value-driven investments amongst parents.

For parents who don't invest at all, SmartPurse asked what their main reasoning was, and the majority (48.83%) responded that 'they don't have enough money'. Looking at these results - that parents believe they need more money to invest, and that they would invest sustainably if it brought greater profit, it's evident that investing myths and misconceptions still exist, and are still having a negative impact on UK parents (and probably all of us).

Children and sustainability

The younger generation are truly leading the way when it comes to sustainable living, and it's so exciting to see this in terms of investing:

• Barclays found that 68% of High Net Worth individuals say that their children have been 'leading the family on sustainable and responsible investment matters'
• HiPP Organic found that 57% of parents think that their children know more about sustainable living than they do

While there are dozens of reasons why sustainability is such a popular issue amongst children and young adults, one of the main reasons we discuss in our report is the increased access to financial education on the topic. From Instagram stories encouraging people to shop more consciously, to Tiktok influencers walking people through how to choose an ethical investment portfolio, the children and young adults are far more able to see the profit and moral value of sustainable investing than their parents might be.

This increased education does appear to help dispel investing myths too - for example, while 93.75% of parents would invest sustainable 'if they knew it brought greater profit', Bloomberg polled Gen Z students earlier this year and found that 51% believed sustainability was already the trend with the biggest future investment portfolio.

What this seems to indicate is that, even when information is given in piecemeal, 7-second videos every couple of days, it can still fundamentally change and improve our relationship with money. However, this can only go so far. The younger generation still requires improved financial education, and our support of their financial confidence, in order to sustain this trend. And is it clear that this generation wants improved education - five years after financial education was added to the UK's national curriculum, the Young Persons' Money Index found that 82% still wanted to learn more.

If children and young adults only learn about money from people and groups online, they are limited in their education. What happens when the money influencer they follow stops posting as regularly about sustainable investing? Will they move onto the next topic this person is talking about, rather than gaining financial experience and confidence to stick with sustainable investing themselves?

This is why accessible, independent financial education is such a passion of mine, because it doesn't just develop financial literacy, but it also gives people the confidence to believe in their own money abilities and act according to their money values.

The less good news - financial parenting still has a a way to go

Our research has shown that parents are more likely to teach the topics and concepts that they understand, and actively do, with their money. And while the increasing figures of those who invest (and do so sustainably) are very encouraging, we also found some revealing truths about the general state of financial parenting...

• 18% of parents 'Rarely' or 'Never' teach or talk about money at home
• Only 1 in 10 parents actively teach their children about pension planning
• Only 1 in 5 parents actively teach their children about investing

What can you do to become a more financially responsible parent?

Here are 5 tips that our report highlights in more detail:

1. 'Talk money' to your children
2. Educate yourself
3. Find your money values
4. Embrace new financial trends
5. Support schools to help your children

I really hope that the transparency our Invest in their Future report sheds on the state of financial parenting, and the concrete suggestions made by parents and experts, will help to inform the creation of better resources, and inspire many parents and caregivers to learn more about sustainable investing.

If you'd like to receive an early-bird copy of the report, leave a comment and I'll be sure to send it across to you! Otherwise, I hope you enjoy reading our insights tomorrow! :)

• Article: The Guardian, 'Gender pay gap starts early with 20% disparity in pocket money - study '
• Report: SmartPurse, 'Invest in their Future: A Snapshot of Financial Parenting in the UK '
• Podcast: BBC Radio 4, Money Box, 'Financial Education '