In our increasingly cashless society, teaching children about money is more vital than ever. Our experts explain the best ways to do it.
Undertaking good money habits starts at a young age and an increasing number of schools are now providing personal finance lessons to help children get to grips with money matters.
But not all schools have to teach personal finance (only those that follow the national curriculum should do so), so learning about money needs to happen outside of the classroom, too.
Research conducted by NatWest in November 2016 shows that just 43% of young people feel confident managing their money. Worryingly, almost a third of those aged 16 and 17 have no experience of putting money into a bank account, while 59% can’t read a payslip.
We’ve rounded up some top tips from education experts to help parents and grandparents teach their children about money.
Ditch the plastic
Young Money, which is part of the charity Young Enterprise, aims to give young people the skills, knowledge and confidence to earn and manage money by providing advice and resources to schools, colleges and universities.
Russell Winnard, head of educator services at Young Money, says teaching children where money comes from is crucial. “We are an increasingly cashless society and it can be difficult for young people to understand what happens during a contactless payment transaction,” he explains.
When in shops, paying in cash can help children see that you have to swap money for goods, rather than just tapping a magic plastic card on a machine and taking what you want.
Mr Winnard says: “It’s good to involve children in the weekly shop – get them to help you choose the best-value products and add up the cost of the shopping basket on the way round.”
Survey results published in February 2018 by financial provider Prudential found that over three-quarters (78%) of teachers and more than a third (37%) of parents believe the growing cashless society is harmful to a child’s financial development.
Mr Winnard adds that showing your child your payslip and explaining how you found employment and earned that money can help them understand where money comes from.
Make tough choices
Education group Stride works with schools in the South East and Greater London to incorporate enterprise courses into the curriculum. It aims to introduce children to the business world and runs sessions that mimic real-life scenarios where children are loaned money as a team and challenged to design, set up and run a profitable business.
Elena Macia, co-founder of Stride, says giving children real-life financial responsibility as early as possible is key.
She says: “If your child wants a ‘big ticket’ item, encourage them to plan how they will achieve it – maybe they can ask for birthday money rather than gifts, earn cash by doing chores or save their pocket money – get them to do some sums to work out how much they need and how long it will take to save it.”
Getting children to make choices related to money can also help them start to think about the value of cash, she adds. Parents and grandparents can set a budget for an afternoon out and help the kids work out the best way to allocate the money – they may discover that forgoing pricey drinks and snacks at the cinema means the family can go for a meal afterwards instead, for example.
Talk about Beyoncé
Financial education charity MyBnk provides workshops to people aged 11 to 25 to help them learn about saving, budgeting and starting up a business. The charity works with schools and youth organisations, and says it has helped more than 200,000 young people to date.
Declan Wilkes, head of communications at MyBnk, says making things fun is important to capture kids’ imaginations. “Starting a conversation about the cost of Beyoncé’s gold leggings might not seem serious but it can help start a discussion about the cost of living in relation to income,” he explains.
Other exercises he suggests include asking children to explain the difference between something you want and something you need. Ask them to list the last five things they bought and decide which category they fall into.
For older children, he suggests linking chores to rewards in order to help encourage putting a value on money. Another useful exercise is involving kids in the household finances to help them understand what it costs to run a house.
He adds: “You can identify a savings goal and plot out a way to achieve it – perhaps by explaining how to cut back on spending or incentivising savings by matching what your children put aside.”
RedSTART is an initiative that aims to help young people learn to budget, save, invest and give back to society. Its goal is to educate one million children and give them the skills to manage their financial future.
Natalie Beardwell, head of marketing at RedSTART, says creating the balance between fun and learning is important if you want to get kids interested in money. RedSTART, for example, runs a workshop that asks children to grow £500 of virtual money as much as they can in a day by applying simple investment and money management concepts.
Another important skill to teach young people is delayed gratification. Ms Beardwell suggests giving kids first-hand experience of managing a budget with a pretend currency – agree what a treat will cost and then explain that they can spend their currency for a small treat every day or save up for a bigger treat at the weekend.
She says: “A habit such as delayed gratification is simple to learn and will be hugely beneficial once children start dealing with money in the real world – and learning that money is all about helping your future self.”
MoneySense is an education programme for those aged five to 18, backed by high street bank NatWest. The scheme aims to help children build the knowledge and confidence to manage their own money.
Kirsty Britz, director of sustainable banking at NatWest, says: “Educating young people about money has never been more important due to the variety of ways now available to spend.”
A crucial lesson to learn is how to keep your money safe. Ms Britz says it is vital to impress upon children the importance of looking after their hard-earned cash – explain that they should store it somewhere safe and ask them to double-check that they have put their money away again after they have bought something in a shop.
Opening a bank account may also encourage kids to keep their cash in the bank where it won’t be stolen. It may also reduce the temptation to spend it! She adds that seeing a bank statement with regular deposits and interest payments growing to a large sum is a great incentive to keep saving.
HOLLY BLACK is a freelance personal finance and investment journalist.