Outside the classroom...children and financial responsibility
Outside the classroom...children and financial responsibility
30 June 2020
There is an instinct to shield our children from anything that may worry them. We want to provide the best we can for them and make sure they don’t see any financial struggles we may face to get there. It’s therefore understandable that the topic of money can be one that parents and caregivers shy away from – we rarely even discuss it amongst adult conversations. My closest friends don’t know how much I earn, what savings I have or how much I spent on my last holiday. So, it is not unusual to question whether you should discuss money with your children.
now is as good a time as any
The rise of student loans, difficulty getting on the property ladder and various events over the previous years and in recent months have created complexities in the financial world, and so it seems fitting to best equip young children with as much financial understanding as possible. According to Warren Buffet, “It’s never too early…Whether it’s teaching kids the value of a dollar, the difference between needs and wants or the value of saving — these are all concepts that kids encounter at a very early age, so it’s best to help them to understand it.”* Buffet is a strong advocate of teaching financial education from an early age and, in 2011, he helped launch a children’s animated series called “Secret Millionaire’s Club”, which featured himself as a mentor to a group of students.
is my child too young to learn about money?
Young children are often described as having minds like a sponge; they constantly absorb and retain vast amounts of new information and pick up new concepts and skills much quicker than we often give them credit for. We’re advised, for example, that the younger we learn a musical instrument or a new language the better. The same can also be said about teaching financial habits, such as the concept of saving money or how to budget. A survey taken from MoneyWise found that children who have been taught about money in primary school are better equipped to defer gratification and save up for things they want than children who hadn’t been taught about money. The same survey found that after receiving some lessons in money, 91% of children were able to defer gratification, a 68% increase on those that previously would not.**
After speaking to a few friends in the field of education, it seems that financial education is lacking in some schools, or that most of it is learned in a mathematical capacity, rather than incorporated within life skills. Children are taught how to add, subtract and multiply. They know that if they have five pounds and buy 3 (expensive) apples that cost one pound each they are left with 2 pounds. But they are not shown or taught what two pounds physically looks like, or what the original 5 pound note feels like.
how can we teach our children about money?
Over lockdown, I came across many different and fun ways we can instil best practice financial habits in children, most of which do not require much additional resource. There are a lot of helpful ideas and inspiration for children of all ages here, such as setting up a ‘tuck shop’ at home and giving children a certain amount of money which they can spend as they wish on snacks throughout the day, and involving them in the grocery shopping and talking about what different things cost.
what do they already know?
As a financial planning firm, naturally we are all advocates of teaching our children about money and promoting good financial habits. When we asked our children what they already knew, we were pleasantly surprised. We heard from a 3 year old who knows that lights need to be switched off as electricity costs money, a 5 year old who believes that the best way to save money is by working hard, and who also understands the concept of how banks work, and a 12 year old who is aware of the relative value of money in terms of effort expended to get it, and knows that he has a building society account which he can deposit money into it if he wants to. He also thinks it’s important to know that money doesn’t grow on trees and takes effort to acquire.
Our conversations with our children align with a study at Cambridge University which found that children are already able to grasp basic money concepts between the ages of 3 and 4. And by age 7, basic concepts relating to future financial behaviours will typically have developed.*
It was interesting to see that from as young as 3 our children have begun to build attitudes and habits around money. Without receiving financial education at school, they have picked up most of what they already know from our own values and habits about money. The more we encourage these habits and take the time to discuss money, the more confident our children will become with money and learn to make considered spending choices in the future – skills that will stick with them for life.
“Children have never been very good at listening to their elders, but they have never failed to imitate them.” James Baldwin
sources
** https://www.moneywise.co.uk/news/2018-06-28%E2%80%8C%E2%80%8C/teaching-kids-about-money-works