You may not immediately think retirement and teaching children about money are things that go together. But for me and my colleagues at TISA, we see the two as going hand in hand.
To help reduce the dependence on debt and to better provide for retirement, people need to save more throughout their lifetime. In our view, the best way to encourage this is to teach children the power of saving, as it can help them make better decisions throughout their life.
Research shows us that a significant proportion of people are not saving enough for a comfortable retirement. We know there is a multitude of reasons for this and it can sometimes be complex. However, a lot of these can be linked back to a lack of basic financial education and awareness.
My previous career was in teaching and having gained this experience, I know how valuable it is to teach children about money in schools. We know financial habits can start to form from as young as seven, but even for children in reception, which is what I taught – that’s children aged 4 to 5 - I know that it’s never too soon to start talking to children about money. I would use coins, real life scenarios and role play to demonstrate how money works, to help children get familiar with using money, which would always go down well.
It is so important that children have a good concept of money and how to make the most of it, because one day they will have to manage their own finances and bank accounts. It is particularly important now that many financial transactions are conducted with plastic.
Every child born between 1st September 2002 and 31st January 2011, was eligible for a Child Trust Fund (CTF) and for some of them, their CTF may now hold a significant amount of money. In fact, this year is the first year that children with a Child Trust Fund will be able to manage their account themselves when they reach 16. In two years’ time, these young people will be turning 18 and they will be able to access the money. However, we need to be aware that the recipients may have little or no experience in managing larger amounts of money.
While financial education is included in the school curriculum for secondary students, only a third of schools are required to teach the curriculum. On top of this, there is a dearth of financial education offered for primary school children. This lack of exposure to financial education is reflected in the results of a survey TISA conducted earlier this year, which revealed that only one-third of children are taught about managing their money in schools.
This is especially concerning when our research also revealed how beneficial young people find financial education. Of the 14-16-year olds who are receiving lessons on managing money in school, over two thirds said the lessons had changed the way they spent and saved their money. On top of this, eight in 10 said they felt more confident in managing their money. This is such a good result, because it means we know these lessons are working. But, I think one of the big highlights was that we also heard from the teenagers themselves. We now know that more than three quarters of those who had financial education lessons, said they actually wanted more lessons on how to manage their money.
I may not be teaching any more, but I’ve never been too far from doing what I can to support financial education initiatives. TISA initiated KickStart Money, a financial education programme that teaches primary school children about money. This scheme has proved to be hugely successful and has helped change the financial attitudes of children as young as seven.
Young people need to know how to make financial decisions early on. Most young people get pocket money or have a part-time job, so they need to think about money management from a young age. It is only sensible we help them make the most of this income and teach them how to apply that similar savings logic by the time they enter the world of work.
I strongly believe that the financial services industry has such an important role to play in helping to encourage young people and children to make the most of their money. We’ve seen a clear demand from the teenagers themselves asking to be taught about money more, so it makes sense for us to teach them while they’re willing to listen! The Child Trust Fund generation are in a unique position and it is one we should work to make the most of. By instilling a savings habit now, it will enable them to avoid relying on borrowing and to build a pot that will allow them to meet their aspirations in their later years.
Carol Knight is TISA’s Chief Operations Officer.