Financial education in childhood is crucial. Attitudes and habits formed in our tentative years can have an impact in adulthood. Passing on your financial knowledge and the lessons you’ve learnt to children and grandchildren can lead to them being more financially savvy and secure in the future, James Rixon, Independent Financial Adviser at Pembroke Financial Services, offers some tips.
Financial education is taught in schools, but it’s not going far enough
Financial education has been part of the school curriculum since 2014. While the introduction is positive, it’s not going far enough as many money lessons benefit from practical experience.
The Young Persons’ Money Index found that parents are the main source of financial understanding. Less than one in ten said they received most of their financial understanding from school. This could lead to some gaps if finances aren’t talked about at home.
A lack of understanding could be playing a role in how many young people worry about money. Some 69% of teens said they worry about finances, rising to 82% among 17-18-year olds.
The good news is that there’s a willingness to learn. Eight in ten said they wanted to learn more about money and finance, with six in ten saying they’d like it to be a separate subject in school. The subjects they most want to learn about are:
- Loans and credit cards
- Tax and budgeting
- Debt management
The findings from the report show that young people know how important financial education is, but may be struggling to access it.
It can also be challenging to access financial information as an adult. Research from Aegon found that 72% of employees don’t benefit from any form of financial education in the workplace. Yet, seven in ten workers said even general information would be useful.
James said: “This worrying lack of support means many don’t understand financial products and options that could affect their future. Separate research found that just a third of employees understood that their Workplace Pension is invested. While discussing pensions might be out of reach for young children, laying the groundwork for engaging with money matters and asking questions can set them on the right path.”
5 tips for boosting financial knowledge in your children and grandchildren
1. Make money part of conversations
James commented: “Money can be something of a taboo subject. We rarely discuss how we invest money or what’s in our savings account. However, making it part of everyday conversation in your home can help children and teenagers grasp the financial decisions adults make and prompt them to ask questions. Making it a common topic while they’re still children can give them the confidence to approach you with questions and concerns later in life too.”
2. Give them pocket money
When learning about money and its value, nothing beats practical lessons. Even a small amount of pocket money each week can get children used to budgeting and saving. As they get older, a bank account and card can be valuable. Teaching the concept of digital money can be difficult without physically having an account they can manage and use themselves.
3. Teach the difference between need and want
One of the most important financial lessons for children is to learn the difference between what they need and want. Making them wait or save for the items they want, such as the latest video game, can help them get a handle on budgeting and planning right from the start.
4. Set up a savings account
“Saving is an important financial lesson to learn. Opening a savings account on their behalf can start a lifelong habit. Seeing how their money grows and learning how interest works can be enough motivation for them to add more. If you have a savings account you’re using to create a nest egg, a second account they can access can be useful for smaller saving goals,” James explained.
5. Lead by example
Finally, children learn by observation. Practising what you preach is important when it comes to passing on financial lessons. Think about the good money habits you’d like children to pick up and whether you’re setting the right example.
Securing the finances of the next generation
Financial education can provide a solid foundation for financial security into adulthood, but you may want to create a nest egg to lend a helping hand.
With many milestones, from purchasing a house to learning to drive, requiring cash, saving for a child’s future can make their transition to independence smoother. There are many products to choose from when saving or investing for a child. Please get in touch to arrange a meeting to talk over your plans and what your options are.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.