Teach your kids the value of money

Financial education is finally set to be included in the National Curriculum in secondary schools from September 2014. The government's decision to include the subject for those aged over 11 came at the end of a two-year campaign led by MPs and peers in the All-Party Parliamentary Group on Financial Education for Young People.

It will be included in the secondary school National Curriculum in both maths and citizenship lessons. Campaigners, including the Personal Finance Education Group (pfeg), are now calling for financial education to be extended to primary schools, but say they are not expecting anything to happen this side of the next election.

Starting young

In the meantime, the understanding is that from September 2014, there will be more of an emphasis on money as a context for learning maths in primary schools - rather than for its own sake.

However, it is thought the more subjective, decision-making ‘financial capability' aspect will not be part of the curriculum in the way it will be in secondary schools.

Tracey Bleakley, chief executive of pfeg, hopes primary school children will start to be taught more about money soon. "It is crucial financial education starts early so children can build up their knowledge as they progress through the system - and can then go on to become informed consumers," she says.

Habits set in stone by age 7

This is a view shared by Kirsty Bowman-Vaughan, young people policy manager at the government-backed Money Advice Service. "We recently carried out in-depth research and found 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." Young people, she adds, find their parents give the most helpful advice on money matters.

"They are also likely to imitate the good - or bad - financial behaviours of what happens in their family," she says. "This is why our next aim is to assist parents nationwide in this very important role; helping them feel confident about integrating money management into their day-to-day interactions with their children."

The Money Advice Service is currently working with experts in education and the financial services industry to bring together a forum and to develop parenting and teaching resources. These are due to launch in early 2014.

Help and resources

With no sign of financial education hitting primary school curriculums any time soon, the onus, for now at least, remains on parents - and grandparents - to help get their children off to a good start.

As a starting point, pfeg suggests talking to your children about money. "It is the most effective way to help your children understand personal finance," says Bleakley. "Explain how you arrive at financial decisions, what's in your budget, and how different aspects of dealing with money make you feel."

Bowman-Vaughan adds that parents shouldn't worry about talking about money. "It's something we all need to learn about," she says. "And it's far better to get kids engaging with money at home where they can mistakes in a safe environment. Give them some responsibility and get them involved with financial decisions. This could be as simple as counting coins or trying to understand the bigger picture of the true cost of a day out, including petrol and meals."

It's also important to teach children where money comes from.

"In an increasingly cashless society, it can be useful to show your child your payslip and explain what you had to do to find employment," says Bleakley. "This can help build financial understanding."

Savings challenges

Another good tip is to set your children savings challenges. "If you give your child pocket money, talk to them about setting a savings target and encourage them to adopt good habits early," says Bleakley. "This is a good opportunity to introduce ideas around planning for the future."

Susan Hannums, director at analyst SavingsChampion.co.uk, adds that parents could use a piggy bank to help engage a child to put their pennies away for future use."This can be a good way to get little ones excited about the basics of saving, and can get them used to saving up to buy the things they want," she says. "And as they grow, hopefully their savings will grow too."

New findings from savings provider Family Investments reinforce the view that putting pocket money aside can help prepare children for later in life.

Its research reveals that while 64% of children don't receive pocket money, of children who do, 84% save at least some of it.

Unsurprisingly, most (47%) slot money away for big-ticket items such as bikes or expensive toys, but nearly a quarter put some of their money towards holidays, and 12% think even further ahead and build up cash for university.

Further findings show more than four in five parents said having to do chores for their allowance will prepare children for the realities of work in the future.

Another good way to engage children in finance is by helping them ‘practise' waiting until they have saved enough to be able to buy something they want.

"This could involve making a savings chart indicating how much money has been saved by colouring in some of those coins," says Bowman-Vaughan. "Your child can then see how many more remain uncoloured - and how much more needs to be saved."

You can also use trips to the shops as an opportunity to talk about your buying decisions. "A young child could help their parent compile a list of items needed for the home, as this helps them learn how to prioritise and plan how much to spend," says Bowman-Vaughan.

Then, as you go around the supermarket, you could ask your children to choose the best-value combinations of set products, and also to do the adding up as you go along.

Another important lesson relates to choosing cheaper items - or goods on sale.

"Children need to learn if there is not enough money to buy a certain item, you need to decide whether to buy a less expensive one - or wait until you've saved up enough money," says Bowman-Vaughan.

Shopping can also help you teach the difference between ‘needs' and ‘wants'.
"Contrast examples of goods your children need every day - such as food and clothing - with items they might want but don't need, such as toys," says Bleakley. "This is a great way of introducing the concept of saving, as well as the need to exercise restraint in spending."

No matter what your approach, the key is to actively involve your children in some financial discussions from a young age. "Personal finance education is so important for children as it will help them make better and smarter financial decisions as adults," says Martin Bamford an IFA from Informed Choice. "The right financial education as a child can help young adults avoid debt, understand complicated contract terms and instil a savings mentality for the future."

Get online to learn about money

There are now a whole host of sites and apps on offer aimed at helping children learn about managing money. Two pocket money sites are worth a look: GoHenry (formerly PKTMNY) and Roosterbank.

GoHenry is a site for children aged between eight and 18 that gives them the chance to try out their skills in the real world but under the guidance of parents, who can set tight controls on spending limits through a linked account. Children get a prepaid card but parents then decide how much, how often, and where their children spend - with no ability to go overdrawn.

Roosterbank is a kind of online piggy bank that gives children their own personalised dashboard where they can keep track of their pocket money. They can then choose whether to use their ‘wallet' to get things they want to buy, or their ‘safe' to put some money aside for the future. The more they save, the more they get rewarded.

Elsewhere, sites picked out by Quib.ly, a members-only community of parents, include Goldstar Savings Bank, Little Digits, Dinorama and Mindblown Life.

Goldstar Savings Bank is specifically designed to teach young children about how to save, with users setting a monetary goal and then seeing how they are progressing towards that goal. Little Digits is a numeracy app that helps children develop their understanding of numbers.

With Dinorama, children essentially run their own dinosaur theme park and learn skills relevant to managing money, while with Mindblown Life, children create their own avatar and then navigate their way through life's financial challenges, such as dealing with debt, coping with unexpected cashflow crises, and learning how to save.

Pfeg has also developed two of its own apps, both aimed at teenagers. These are the My Money Shaker app and the Max Your Money Skills online tool. Both are available at pfeg.org