Children left in the dark about saving

The winners of a national competition for teenage investors are succeeding where parents and teachers fail, writes Sam Dunn

In just three months, they managed to turn £100,000 into £155,000. Yet these investment gurus don't earn six-figure City salaries. In fact, they have an average age of 17.

Four teenagers from Plymouth College, an independent school in Devon, have trounced the FTSE All Share stock market index with their phantom basket of shares to win the 2004 ProShare Student Investor Portfolio challenge.

Their performance puts many City fund managers to shame. But while the students' financial savvy might appear to promise well for the future of the UK's personal finance industry, they are the exception, not the norm.

According to the Nationwide building society, more than half of 11- to 16-year-olds say that neither their parents nor their teachers talk to them about saving money. The Halifax also found that 51 per cent of parents do not encourage their children to save anything at all.

"It's a huge challenge to work with the [diverse financial] backgrounds children bring with them to school," admits Vola Parker, business manager at the Personal Finance Education Group (Pfeg), an educational charity sponsored by the Government, the financial industry and its watchdog, the Financial Services Authority (FSA).

Ray Milne, the Halifax's head of financial services, fears attitudes in the home could scupper the Government's plans for child trust funds (CTFs). For its part, the Treasury hopes that the £250 to be given to children at birth (from April next year) and subsequent top-ups will help new generations of Britons to grasp the mechanics of saving.

But Mr Milne says parents who don't make the most of CTFs could waste this oppor-tunity. "As parents, we have got to instill in our children the importance of saving from as early an age as possible," he warns.

Children struggling to save have every right to complain about a lack of example from their elders. The Association of British Insurers estimates that there is a £27bn gap between what we should be saving for an adequate retirement and what we actually put aside. Add to that the UK's eye-watering levels of personal debt, and millions of homeowners on uncompetitive mortgage rates, and you have an adult population failing to master its own finances - let alone those of its children.

Meanwhile, personal finance education continues to languish as a non-compulsory part of the national curriculum. And teachers wrestling with their own finances often find the subject especially difficult to teach.

"Some teachers have a problem with confidence," says Tara Golshan, head of education at ProShare, which runs the national Student Investor Portfolio challenge, in which nearly 1,000 schools took part this year. "There's a lost generation of parents, and teachers, who know very little about finance."

The Government is working with the FSA to tackle the problem: a financial-capability steering group was set up last year. One possibility being explored is a levy on all financial bodies to "educate" their customers, but details remain hazy.

The steering group will shortly publish a strategy document that will look at ways of funding personal finance education in schools. But, ironically, the two charities closely concerned with financial education, Pfeg and ProShare, have themselves run into funding problems.

ProShare is due to have its state funding stopped. Pfeg continues to rely on sporadic funding and handouts from compa- nies such as Barclays and HSBC.

Meanwhile, Pfeg's Ms Parker is battling on with what seems like a thankless task. "The hope," she says, "is really that [financial education] will trickle down to the children."

HOW TO GET KIDS INTO GOOD HABITS

* Encourage them to develop a sense of responsibility by opening a young saver's account on their behalf.

* Motivate them: offer a £1 incentive if they manage to save £5 in one month.

* Make them earn part of their pocket money by doing chores.

* If your children need money, by all means lend it to them but always make sure they pay you back.

* Children learn by example, so involve them when making your own big purchases, such as a new car.

Source: Halifax