This week, along with the kings and queens of England, the structure of a human kidney, how to tackle still life drawing or the finer points of coding, school students across the country will sit down to lessons about money.
In a bid to curb the confusion and misunderstanding that have helped drive the rest of us to dizzying new heights of personal debt, county court judgements, bankruptcy and even into the arms of criminals, My Money Week is a bid to equip the next generation of adults for their financial future.
And if current projections for everything from the housing market to retirement and care costs are anything to go by, they’re going to need all the help they can get.
The good news is that with some key skills and information, numerous studies have shown children and young adults consistently outperform their parents when it comes to savvy money management.
Research out this week from Nimbl, a prepaid debit card and smartphone app for 8 to 18-year-olds found that children set aside 7.5 per cent of their weekly pocket money – their version of disposable income – compared with adults who save just 4.9 per cent of theirs.
With the average weekly pocket money coming in at £10.26, almost half of children decided to save some of it by themselves rather than being encouraged by family.
Once they have established these habits, the evidence shows they stick with them. Some research even suggests that if the children in a household are taught about money, their entire household benefits from a better grasp on their finances, including budgeting, paying down debts and building savings.
But one of the major reasons the My Money Week initiative is important is because, despite now being a compulsory part of the curriculum, the next generation is being consistently failed when it comes to the basic financial education at school.
The London Institute of Banking and Finance reports that 54 per cent of 15 to 18-year-olds in full-time education receive no form of financial education at school whatsoever. Girls are less likely to have had financial education than boys, and those from less privileged social groups are also more likely to fall through the net.
While two-thirds of this age group worries about money, young adults also have high expectations of their financial future. They expect to earn up to £20,000 a year more than the national average, underestimate their personal debt levels if they go to university and how much they’ll need to save to buy a home.
5 ways to teach kids about money
If, aside from this week, they’re not getting the right support at school, what can parents and carers do at home to give their children the best chance of a positive financial future? Make it real, engaging and useful.
1. Encourage saving from an early age
It’s never too early to begin saving, no matter how old your child is. Encouraging them to engage with their finances from a young age will prepare them for when they eventually become financially independent. It’s important for children to understand that just because you have money, it does not mean it needs to be spent all at once. Why not open up an ISA for your children and allow the magic of compound interest to put their pocket money to work?
2. Practise budgeting
Building a budget encourages your child to take a close look at their spending habits. This could be introduced lightheartedly from an early age. When you go food shopping for example, why not give them a set amount of money to see what they can buy on a budget. This will allow them to develop a better understanding of value and is good practice for when they leave home, get a job or go to university.
3. Teach them to be credit wise
Although credit card borrowing fell earlier this year, borrowing is still high, particularly as there are so many options on the market. As such, teach your children early on about borrowing money. One way of doing this is by lending your children an amount of money and agreeing the interest rate that they need to pay back each month. You can then save the money developing them a little nest egg and give it to them once they have paid it all back.
4. Decode the financial jargon
With so many different offers on the market, it can be difficult to cut through the financial “jargon” and make sense of what’s best for managing your money. Not understanding the meaning of terms such as APR on a credit card or interest repayments on an overdraft can really impact their financial futures. Thankfully, there are lots of resources to help from an early age, including online guides from charity Personal Finance Education Group, which runs My Money Week.
5. Make them work for it
Letting children earn a little bit of extra pocket money by doing chores around the house has always been a good way of teaching them the value of hard work. It also has the added benefit of giving them the responsibility of earning money and saving from a young age. If children work for their money doing chores, even if it is just a few pounds here and there, they can develop a better appreciation that money is earned, not just given to them.
Source: Zurich UK
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