There is a large body of evidence that adults who received financial education in school are more likely to save and plan for retirement and to accumulate greater wealth.
Research by the OECD Programme for International Student Assessment (PISA), has also demonstrated how higher levels of financial literacy are associated with shopping around (for example, choosing mutual funds with lower fees or mortgages with lower interest rates), avoiding high interest payments, and a greater likelihood of seeking financial advice.
But the OECD has also found that are around one in four children in the countries it surveyed are unable to make even simple decisions on everyday spending, while only one in ten can understand complex issues, such as income tax.
So what is the state of financial education in the United Kingdom? What more can schools be doing? And how can parents help their children to develop a healthy relationship with money?
I put all of these questions to financial education specialist ANN GRIFFITHS from the Money Advice Service.
Ann Griffiths, thank you for your time. Perhaps you could start by explaining what your role entails?
I’m the Senior Policy Manager for Children and Young People at MAS, which means that I lead the work around financial education for any child or young person under the age of 18. It involves working to improve and strengthen the financial education offered in schools, but also in homes and in communities as well.
So what sort of financial education is currently available in the UK?
There are lots of different sorts of financial education available out there. Financial education is in the curriculum in each nation in the UK, in primary and secondary schools in Wales, Scotland, and Northern Ireland, and in secondary schools in England. A lot of financial education tends to be taught in schools through Maths, but there is some content as well in Citizenship in England and other subjects, including around health and wellbeing in the other nations. We’ve mapped about 130 different financial education interventions available across the UK which you can see on the fincap.org.uk website.
What research has the Money Advice Service done into how financially literate children actually are in Britain?
We conducted a survey of 5000 4-to-17-year-olds and their parents in 2016. The aim was to get a good understanding of the level of financial capability among children and young people, as well as to understand more about the relationship between parents’ financial capability and the children’s financial capability.
That survey showed that, overall, children are doing well on quite a lot of basic things. For example, most children are fairly cautious about borrowing, and most children have experience of using money. But it also showed that there are some things that there really needs to be some improvement on. For example, only just over half of children and young people save money regularly.
So what are the other main areas that we need to work on?
Other areas include the fact that around one-in-five 16-to-17-year-olds doesn't have any bank account, and many of those who do aren’t using them.
We also know that there’s more that we need to do in the delivery and the supply of financial education. Only about 40% of children and young people say that they’ve learned about managing money at school, and less than a third are getting really good financial education and learning about money in the home.
What would you like to see schools doing?
We’d love to see schools doing more of the great things they're already doing — not just teaching financial education within the curriculum subjects that it’s in, of course, but also going beyond that.
We’ve seen schools that are teaching about money through drama, putting on plays around different money choices that people have, or through music, talking about the cost of buying music through different ways, or even the cost of producing an album. We’ve also seen schools teaching about money through history, learning about how money evolved. So it can be covered in the entire curriculum.
We also think that there’s more that can be done to help improve the confidence and skills of teachers, so they’re able to teach about money in ways that are relevant and applicable to children’s real lives. We also want to make sure that all schools have access to really high-quality financial education resources, to guidance about how to teach it well, and also to people who can help them deliver it, if they want to bring in external charities or other experts to help.
What does the evidence say about the role of parents?
The evidence around parents’ roles is really strong. From our financial capability survey, we’ve shown that there are simple things that parents can do that are strongly associated with children’s financial capability and financial behaviours. That includes things like giving their children regular money that they have responsibility over. That’s one of the most important things that parents can do, and it doesn’t matter how much they give.
Also important are things like parents setting rules about money, children having choices over their spending and saving, and things like parents role-modelling. Parents showing children quite simple things like how to check a bank balance is also strongly connected with the child’s financial capability.
What about involving children in the family shop?
Yes, giving children choices by, for example, letting them pick between certain products in the supermarket with a little bit of their weekly food budget, can be very helpful.
Again, talking to children about money and budgeting, and showing them how to do simple tasks like checking the change that you get when you pay with cash — all of those sorts of things can help children learn well.
At what age can parents really start to teach children about money?
We believe that starting as early as possible is key. We know that the habits and skills that will be needed to manage money later on in life start to form from as early as the age of three — things like self-control, for example.
By the age of seven, there are many habits that begin to form — things like whether money is something to be afraid of or whether saving is a positive thing. Most children are able to grasp the concept of what saving is by the time they’re five years old. If habits can start to be built really early on — between the age of three and seven — we think that will set people up for doing well later in life.
A big problem, of course, is peer pressure and the fact that other children and their parents have much more money to spend. How can parents deal with that?
Parents should talk to their children about the importance of occasionally saying no. It may seem like the best thing to give children everything they ask for, but all children need to learn to distinguish between needs and wants.
We do know that “pester power”, as we call it — children keeping asking for things — can be a really challenging thing for parents to deal with. But again, there are ways they can start to introduce children to the concept of how much different things cost, and the fact that spending money on one thing means they can’t spend it on something else.
We’ve talked about primary school children and younger teenagers. But what about older children and young adults?
We’ve got information available on the Money Advice Service website about how to talk to older children and teenagers about money, and we will also be developing some more information and content on that.
I’d also say that there are lots of organisations out there that specialise in support for older young people, such as student money advisers in collages and universities, to help young people navigate the challenges that they might come across.
Beyond that I’d say that it’s really important for parents to start to introduce the kind of topics that it's key for young people to understand when they enter independence. I’m talking about things like having access to a bank account, understanding the different sorts of accounts, understanding how to do basic budgeting, and how to manage with the amount that they have to spend each week. Young people also need help in thinking about balancing the cost of things today with their longer-term goals for the future.
Investing, as opposed to saving, is generally something that people don’t start doing until a little later. But what’s being done in schools to educate children and young people about investing?
One of the interesting findings from our mapping of financial education across the UK is that there are actually very few existing interventions, projects or resources covering investing, so we think that that’s a gap that could be addressed.
I absolutely think that investing is a topic that young people and children should be learning about. We’ve been working collaboratively with some financial education charities in the sector to develop learning frameworks that teachers can use with children of different ages, and investing is in there. Children should be learning about it from 11 upwards — the basics around knowing the different ways that money can grow, choosing different types of investment, and also the risks associated with them.
Finally, Ann, if you were asked to sum up in ten seconds what parents should do to help their children grow into financially savvy adults, what would you say?
Give them responsibility for money as early as possible — and the freedom to make their own choices with it — and help them to learn from those choices.
If you would like to contact the Children and Young People team at MAS, email email@example.com.
The Money Advice Service is coordinating Talk Money Week, which runs from 12th to 18th November 2018. It’s an annual event organised as part of the Financial Capability Strategy for the UK and aims to get more people talking about money. To learn more, and to get involved, click here.