One may wonder there has to be something wrong when we come across statistics like these:
“Over 14% of 18 to 24-year-olds have had a County Court Judgment or Court Decree granted against them(for inability to pay off debts), compared to just one in 50 (2.1%) over-55 year olds”.
At home children may get to start early with money management lessons from parents. However, learning how to manage money as part of a formal curriculum will have far wider impact on children in how they value money, assess risk, make informed choices and take responsibility for their own actions.
At Guarantor My Loan we find ourselves assessing hundreds of applications from young people (sometimes as young as 21 years), and often we hear the same repentance (I wish I was better with my money), or they remember the good old lines mum and dad always said about saving for a rainy day.
With a formal curriculum introducing money to children, not only will children then grow up to be better prepared to manage personal finances, but will have transferable soft skills to bring when they start working. Financial education can bring young people to develop their attitude to risk, become aware of their own behaviour and emotions while making financial decisions, especially in tough circumstances. This understanding and awareness can be the building blocks for further development of crucial skills such as communication, teamwork, problem solving, creativity and resilience. Any employer will seek to find these skills when they hire someone.
Support for financial education in schools is overwhelming. Research from Personal Finance Education Group (PFEG) found that 94% of teachers, 90% of young people and 79% of parents agree that financial education should be taught in schools; but less than a third of primary schools offer it.
The study also found this is partly because schools don’t have the know-how and resources to put together formal programmes/activities, and also because they are under pressure to deliver on core elements of the curriculum.
Getting schools to formally provide such education with adequate training and resources is just as important as starting early too. The 2015 Manifesto: Building Generations of Game Changers, from PFEG calls for financial education in primary schools and for PSHE (personal, social, health and economic) to be mandatory.
PFEG also have many other suggestions; one that really caught our attention here at Guarantor My Loan is ‘savings clubs’ to encourage parents to get involved in their child’s financial education as they would be allowed to join the credit union, with school staff, as part of the “whole community” approach of the programme, with parents offered the opportunity to set up dedicated accounts to save for school or family related expenses such as uniforms and school trips.
However, until the introduction of financial education becomes a reality as PFEG envisages, there is much parents can also do at home. In fact, research exists to show that adult financial habits are set by the time a child turns seven. These findings reveal that alongside the role played by schools, the way to influence the habits of children is through their parents.
One important step is to ensure you can set a good example yourself for them to use. You will then be a source of advice for them and in time they may even turn to you for help. Explain how you arrive at financial decisions, what's in your budget, and how different aspects of dealing with money make you feel.
Giving them responsibility is another good place to start Make it a game- Give them a fixed amount of pocket money for a week and nothing extra; get them to budget for each week and if they have been good, offer a reward.
In fact a good way to reward your children would be to match the amount of money they are able to save after 6 months. The moment children look at it as a boring exercise or something they are being forced to do, like maybe homework, they will miss the whole point. So the objective here is to teach them money management but make it fun or incentivised.
It might not come as a surprise to you how much children as young as 6-8 years are able to grasp. Why not take advantage of that and have them start early? If you’re going out for dinner and paying with a credit card, take the opportunity to talk about how credit cards work. It can be useful to show your child your payslip and explain what you had to do to find employment. This is also important when we think about financial choices and employment opportunities faced by young people will likely be more challenging than for past generations.
If you have any tips, tricks or examples of your own to share with us, we would love to hear from you.
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