Why Children Need To Be Financially Literate
When it comes to money management, children and young adults consistently outperform their parents, the Independent reports. 8 to 18-year-olds choose to save 7.5% of their weekly pocket money on average, while adults save just 4.9% of their disposable income, a study by Nimbl finds. Research even suggests when children are taught about money, their entire household benefits from a better understanding of their finances, including, budgeting, saving, and paying debts. Ultimately, creating financially literate children decreases their risk of developing debt in adult life and puts them on the path toward financial security.
Gaps in the national curriculum
In September 2014, the government added financial education to the national curriculum as part of maths and citizenship stating its importance for “enabling students to manage their money on a day-to-day basis, and plan for future financial needs”. However, schools not following the national curriculum aren’t required to make personal finance compulsory. In fact, the London Institute of Banking and Finance reports 54% of 15 to 18-year-olds in full-time education aren’t taught any financial education in school. This is despite recent research discovering over half of parents want more time spent on personal finance even if it means dedicating less time to other subjects.
The power of financial education
Leading City institutions are currently urging the government to incorporate compulsory financial education into school curriculums. This comes after the success of KickStart Money, a financial education initiative, which tested the effectiveness of teaching money management in primary schools. After three months of classes, 68% of pupils were better at delaying gratification; 87% understood their financial decisions had consequences; and 70% were working towards their own saving goals. The children also demonstrated an improved understanding of basic financial concepts — there was a 43% increase in the number of pupils able to define “habit”, and a 67% increase in pupils able to define the concept of a “budget”.
The role of technology
Children form money habits at as early as six years old — something largely influenced by their parents. Developing a positive relationship with money and learning how to save, budget, and spend responsibly are important life skills. As such, technology is making it easier to introduce financial concepts to children at young ages. Online budgeting tools can teach children financial discipline, the difference between necessary and frivolous purchases, and the importance of not spending more than they earn. And apps like Kiddie Kredit, for example, let children complete chores to earn credit (as approved by their parents) which they can spend on non-monetary rewards (like watching cartoons). If they use too many points, however, their score drops, similar to how a regular credit score works.
Financial education increases children’s current and future financial capability. It’s important for both parents and schools to take a proactive role in teaching children about monetary principles and critical financial skills. Even basic lessons can help children make smarter decisions and set them up for a better, more financially-comfortable future.
Ali Hamilton is a regular contributor to Global Dimension
