When is a good time to start a child's financial education? Experts suggest as early as the age of seven. Not to tell them about complicated economic theory, but simply to give them a basic grounding in money sense.
That often simply means giving them pocket money and explaining that when they spend it, it's gone for good – and that rather than splashing out on sweets, they could save up for something special.
With that in mind, I gave a talk last week at a local school to 200 14-year-old boys. My talk was labelled "financial capability", but rather than rabbiting on about budgeting and money management, I decided to find out how much the boys knew about finance.
They surprised me with their knowledge and understanding. Several of them told me that they earned money by, for instance, doing jobs around the home and were using that income to save up for something. They were saving for different things, ranging from the latest Xbox game to one boy who said he wanted to put cash aside for university costs.
Even more impressive was how quickly they engaged with the subject. When I asked them why there are always sweets by the tills in shops, they knew right away that it was because retailers do so in the hope that we will buy them. They hadn't heard of the term "upselling" – which simply means to flog extra stuff to unsuspecting shoppers – but they sure knew how the idea was supposed to work.
Similarly they knew about the dangers of in-app purchases on computer games, where free games targeted at kids encourage them to buy extra goodies online to improve their performance. A typical "freemium" game – as they're known – can end up costing an unsuspecting young victim around £80 or more.
Their teacher told me they hadn't yet been taught the concept of compound interest – "that's next year" – but they very quickly caught on to the benefits of earning interest on the interest on your savings. In other words, they understood that your money can actually earn for you.
They had a clear idea of what inflation is and how it affects finances, although none actually knew that in the latest official figures the rate had fallen to 0 per cent. Similarly they had a rough idea of the cost of a home or a car.
Which brought us neatly to the idea of a false economy – when you end up spending more than you need to, simply because you think you're getting a good deal.
I asked them for an example of a false economy, expecting them to mention three-for-two deals in supermarkets or something similar. The first answer? "Raheem Sterling", the 20-year-old striker who has recently been bought by Manchester City for £49m. These boys were even smarter than I had expected.Reuse content