The Importance of Financial Education for Children

In preparation for writing this is article I asked Dylan, my eldest son who is 11, what has he been taught about finances and money at school? He replied, “We learnt about money in maths, as in if I buy three things costing 15p what would my change be from £1”. Not quite the type of financial education I was hoping for!

Unfortunately, this is common in many schools, with a huge gap in basic financial education. AXA Investment Managers has recently carried out some interesting research that highlight the size of the issue and the potential impact.

Financial Education for Children

Financial education in schools can clearly play a vital key role when it comes to getting children understanding more about finance, but the report found that less than half of kids (47%), say they are learning about money at school.

For those who are receiving financial education, the findings show that it’s clearly having a positive impact with 60% of children proactively saving their cash. In stark contrast however, the same amount who have not had any financial education (60%), say they are not saving a penny. This is a very scary response from those who received financial education compared to those whom haven’t.

Some encouraging results from the research

Despite this lack of education there are some encouraging statistics about how much children are saving. A substantial amount of 68% are tracking how much they are saving, made all the more easier with technology and apps such as Go Henry and Rooster.

Around two-thirds of the children asked receive cash as a gift for their birthdays or Christmas, mostly from family. More than half (56%) of children receive regular pocket money, giving the typical UK child a weekly income of £12.76 per week – or £663.52 annually. And this income is encouraging saving! Specifically, the children whom are engaged with money prefer to save rather than spend, nearly half of them.

AXA IM are passionate about improving these levels of financial education and have partnered with KickStart Money, an initiative developed by charity MyBnk involving 20 of Britain’s leading savings and investment firms, where the goal is to bring financial education and essential financial skills to more than 18,000 primary school children.

How do I teach my children about money?

With the absence of this financial education at school I teach the boys key lessons myself. My boys are 11, 9 and 6 and I really believe that you should start teaching them about money as young as possible. These are the tools I use and the subject I explain to engage them and encourage their understanding:

your children's personality

  1. Pocket Money

All three of my boys receive pocket money, but I don’t give cash! I use an app called Rooster that puts £5 per week into holding pot for them. This builds and builds in the app. Whenever they want to buy something, they use the money from their pocket money pot to pay for it. This isn’t real money as the money always sits in my bank account and I pay for the things that they want. At the end of every quarter we look at what money is left and transfer it into their savings accounts. This money is also used as punishment if behaviour is bad then money can be taken away from the pot.

This really helps them to understand the cost of things they want to buy, my eldest no longer dreams of the £100+ football boots he is happy to have the £40 boots as he knows it’s coming from his pocket money. They love to watch the balance grow and grow.

  1. Teaching them the basics of the household budget

I have shown them the household budget and explained what everything is that we pay for each month and how much each bill costs. I think its really important for them to appreciate that, in our situation, the household bills cost £3000 per month, which means mummy and daddy must earn that much money to ensure everything is paid for. We talk about thing that they can help to influence. We talk about switching off lights and Xboxes to save electricity, we talk about cooking homecooked food to reduce eating takeaways. This will prepare them so well for adult life.

  1. Talking to them about how my business earns money.

I share regularly with them earnings from my business to illustrate how running your own business works. We talk about the ups and downs of my income and what expenses I must pay for the business. Just this week Josh, aged 9, and I were looking back through my monthly income for the past few years and I was asking him to spot pattern of which months were higher income than others. Last week Dylan was asking about tax, so I was explaining how I make money, then take off expenses to get a profit for my business. I then pay tax on the profit for my business.

This leads onto questions about tax and where the money goes and what type of things it pays for. Brilliant education for the boys.

  1. The difference between savings and debt

A really important message that all children should understand is the difference between savings and debt and the use of credit cards. The boys are very aware of what a credit card means and that it is borrowing money from the bank, that must be paid back. Also borrowing this money comes at a cost. I want to install the knowledge from a young age that if you want something you should save up for it and then buy. This education was missing from my younger life and for most of my adult life have bought and then paid back afterwards. I really believe if you install this knowledge early then when an adult they will replicate this behaviour.

Do you have any other ways of teaching your children about finances and money? Leave me a comment I would love to hear what you do.

This is a collaborative post with AXA IM.

To read the full consumer survey click here.

Methodology of Research

1During June 2018 GFK interviewed more than 2,000 adults (51% female and 49% male), focusing on the top 80% of earners from across the UK. Those respondents who were parents were asked to invite their children to answer some questions. The parents had the option to ask the questions, or to let the children take part themselves. In total, GFK interviewed 120 children, aged between eight and 15 through an online survey.

About AXA Investment Managers

AXA Investment Managers (AXA IM) is an active, long-term, global, multi-asset investor. We work with clients today to provide the solutions they need to help build a better tomorrow for their investments, while creating a positive change for the world in which we all live. With approximately €759 billion in assets under management as at end of June 2018, AXA IM employs over 2,390 employees around the world and operates out of 30 offices across 21 countries. AXA IM is part of the AXA Group, a world leader in financial protection and wealth management.

 

 

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Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

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