Managing finances is one of the most important skills we adults need to know. However, the recent GoStudent Future of Education Report found that 64% of GenZ and Alpha children in the UK don’t feel that their school is teaching them the core skills to manage their finances. Read on to learn more about everyday activities to teach your child financial literacy…
- What is financial literacy?
- At what age can children learn about money?
- Is financial literacy taught in school?
- Our top five everyday activities to teach your child financial literacy
What is financial literacy?
In short, financial literacy for kids is about knowing how to teach your children about money.
Financial literacy means when someone has the skills and knowledge to understand what money is and make informed decisions about how to manage it. Financial literacy can include knowing how to budget, how to save money, and how to invest it.
Financial literacy can also include things like knowing how to use a bank account, how to apply for a loan, how to repay a loan.
When faced with terms like ‘cost of living crisis’ most adults know what this means. We know about bills, we know about income tax, we know about the cost of sending a child to school, but many of us learned that the hard way – experiencing it for the first time.
Wouldn’t it be best if this sort of thing was covered in schools? According to data from the GoStudent Education Report, 79% of parents want to see personal finance in school curriculums.
At what age can children learn about money?
We might take it for granted, but understanding what money is, how it works, and how to learn about it is more complicated than some people might initially think.
A child might think that a coin looks like treasure and see its physical worth. But at what stage can they link that physical coin to digital currency? After all, digital currency is quite an abstract concept – this invisible money which we access with a magic plastic card!
Research from the University of Cambridge suggests that children grasp how to recognise the value of money from the age of seven. This means that we can start talking to children about money from that age. Having these conversations will help them form an understanding of what money is and how it operates.
The same study suggests that, from the age of seven, children are also able to plan ahead and understand that some things are irreversible – like spending or losing money!
To be clear, we don’t expect you to start explaining negative equity to a seven-year-old! But we do think there are things which you can do to teach financial literacy skills to your children. And why not start early?
Is financial literacy taught in school?
The answer to this question is ‘not enough’. Certain areas of financial capability are taught in maths and numeracy, but according to the GoStudent Education Report, not enough to satisfy students or parents.
The UK National Curriculum for Key Stage 1 and 2 maths states that teaching should ‘involve using a range of measures to describe and compare different quantities such as length, mass, capacity/volume, time and money.’
But is this enough?
Our report found that 64% of students across the UK do not feel that their school is teaching them the core skills to manage their finances. Over all six countries involved in the study that statistic was 65%.
Our research also found that only 21% of children feel that enough is being done to prepare them for the real world – the lack of financial literacy was a driving factor behind this low percentage.
According to a university study cited by Go Henry – Money Missions, 87% of teenagers have difficulty making everyday financial decisions. The Go Henry – Money Mission initiative has plenty of resources to help children learn about money matters.
As well as this, there are plenty of charities and outreach organisations like MyBnk who do outreach work in schools to empower young people to take charge of their future by bringing money to life.
Our top five everyday activities to teach your child financial literacy
Here are our top five everyday activities to teach your child about financial literacy:
- Start having conversations about money
- Let them manage/earn their own money
- Open a bank account in their name
- Play shop
- Involve them in your financial decisions
Start having conversations about money
The best way to introduce a child to a topic is to talk to them about it. Fancy teachers sometimes call this dialogic pedagogy: learning through talking.
You could say something like ‘how much money do you think this jacket costs? What about this hat? So how many hats could we get for the same price?’ This sort of conversation allows children to see everyday objects as having a monetary worth which enhances their understanding about value.
The Money & Pensions Service even have an event called Talk Money Week to encourage people to talk with young people about money. According to their website, people who talk about money:
- make better and less risky financial decisions
- have better personal relationships
- help children develop good lifetime money habits
- are less likely to be stressed or anxious, and generally feel more in control
An important conversation about money is teaching children to save. If a child ever gets money for their birthday, you can tell them to save half of it. This starts a good habit early on and teaches children that sometimes the long-term goals are more worthwhile.
We recognise that it’s important that kids don’t become obsessed with money. That is why, as a parent or guardian, you have to introduce them to the subject in a healthy and meaningful way. That usually means support and guidance rather than orders and demands.
For bank related financial literacy, you could always try out the NatWest Virtual Bank which lets your child have a go using an ATM, changing currency, and exploring coins. The website also offers a guide on how to get started.
Let them manage/earn their own money
Pocket money is a great way to introduce children to financial responsibility and the rewards of saving.
Even if it is something as small as £2 a week, they will learn a lot about what money is and how it works. For example:
- looking after money is an important part of knowing how to handle finances
- saving a small amount over a long period of time can add up
- different items cost different amounts (sometimes the same items cost different amounts depending on the store)
Some people like to give children money for doing chores around this house. This can also be a great way of teaching children about the various domestic skills that they need to know about!
Managing some pocket money can also help them develop their maths skills.
If you’re asking yourself, how much money should I give my kids? We’d say it depends on the kid, the age, and your own financial situation.
Open a bank account in their name
A bank account can be opened for a child from 11-years-old (parental consent is required up until 16).
Going into a bank and see how accounts works can be a very valuable lesson for children. From the paperwork to the social interactions with the cashiers, the experience of being in a bank can be really memorable.
As well as having a bank account, they can also have a bank card. This will allow them to purchase things from shops on their own. Having a bank card with an account number, PIN, and security code also teaches children about how digital banking.
This brings us on to another important lesson that owning a bank card can teach children: security. Teaching them how to safely own a bank card (i.e. not sharing details) is an important part of financial literacy.
Owning a bank card can also give a child independence which can help build their confidence.
If you want to open a savings account for your child, you check out the Beanstalk app.
A classic throwback to any child before the boom of video games – playing shop can be a great way to teach children about money. This gamification, allows children to understand that certain items have worth. Playing shop can also teach children that somethings are overpriced and expensive whereas others are a bargain!
You can use fake money: just write a number on a piece of paper. Pick random items around the house and create a play shop.
A play shop is where you start an imaginary shop with play transactions. For example, you can sell a book for £5, a mug for £3 and a television for £400.
Involve them in your financial decisions
This is a tricky one, but can be important. On the one hand, you don’t want to make a child feel anxious about your own financial situation, but, on the other hand, you want them to learn through your experiences.
Our advice would be to keep conversations positive. You could talk about how a promotion at work, or a new job, means you can eat out at a restaurant. You can tell them that you are planning a holiday on a budget and can compare prices together.
You could even have a conversation about Christmas saving tips!
As the GoStudent Education Report has found, both parents and children across Europe feel that not enough is being done in schools to equip young people with financial literacy skills. That is why it is important that we take an active role in teaching financial literacy skills.