How and When to Teach Children About Money?
A recent survey found that children don’t much like learning about money at school. No surprise there, you might think. The same survey found that lessons focused on money tended to be abstract, lacking in humour and so the subject failed to capture the imagination. So, why is learning about money important? And at what age should children begin to engage with finances?
What is Financial Literacy?
A financial education provides children with the knowledge, behaviours, and skills that will allow them to manage their finances throughout their lives. It’s about learning to save, living within your means, and setting financial goals which are then achieved. These are fundamental capabilities in contemporary society and yet they are still not given a central place in the school curriculum.
Teaching About Money in the Home
Traditionally children have learnt about money from their parents and grandparents. Learning comes in the form of ‘Piggy Banks’ or pocket money. Whilst these remain key, teaching experts suggest that embedding certain behaviours at a very early age can have a positive impact on a child’s relationship to money at all stages in their life.
Children start learning behaviours very early, between 2-4. The three behaviours which will serve them well financially are:
- Patience. Understanding that waiting for a treat or saving some sweets for later are admirable ways to behave.
- Managing Resources. It’s useful for children to understand that resources are finite. So, laying out the treats for the week, and then working with them to decide how to make them last is a way of learning about budgeting.
- Transaction. Showing children how shopping works when they come with you to the shops, or playing ‘shops’ at home, helps them to understand the basics of a financial transaction.
Why Money Habits are Set Between 4-7
Most of our habits that will determine the way we live our lives are learned by the time we reach 7 years’ old. Any problematic habits will be difficult to unlearn, and new habits will take time and application to achieve – probably well into adulthood. The most important habits for children to learn at this stage are investing for the future and saving a portion of the money you have.
1. Saving a Portion of What You Have
By the age 4-7 children will normally be receiving pocket money, and financial gifts for birthdays and Christmas. Parents can suggest that a proportion of any money they receive is saved. At this age a bank account is rather an abstract idea, so use a glass jar for savings instead. That way, children can watch their savings grow over time.
2. Investing for the Future
For most children, holidays, or days out ‘just happen’; there’s no sense that they need to be planned and saved for. Choose a treat that your 6/7-year-old is longing for and put them in charge of the financial planning. Go through all the things that will need to be paid for and once the amount is agreed allow them to take the lead with payments.
When Should Children Get a Bank Account?
Between the ages 8-13 children will begin to understand the potential for earning money, so look for ways that they can experiment with this. Once this is embedded as a skill, a bank account is the next logical step. Transferring their saving habits from a glass jar to the more abstract use of a debit card is a tough leap for a young mind to make. Be prepared for them to make mistakes and binge spend. It’s all good learning for the future.
Working With a Financial Advisor
Young adults who have grown up learning about money at home and at school will understand the need to manage it as their financial goals become more ambitious. At present only 8% of UK adults access professional financial advice on a regular basis.
Harpur Wealth financial advisors are delighted to see that younger people are now using our services. We are expecting that this will grow apace as the development of pension funds become ever more critical to young people’s financial futures.
Harpur Wealth Management
At Harpur Wealth Management we work closely with clients and their families. We take time, therefore, to get to know the people we work with. Because we do our best work when we know, in detail, what we need to achieve.
We are always happy to talk to young adults about the work we do, and the way investment helps to grow savings. It’s never too early to start planning for big financial goals, like planning to buy a property, or finding a pension that will finance your retirement.
Why not book a free consultation today with a Harpur Wealth Advisor? Call us on 01234 924620 or use our online form.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
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