As Money Marketing suggests that younger people are reluctant to engage in long-term financial planning, the so-called “Great Wealth Transfer” makes financial education more
important than ever.
Keep reading for five key financial lessons to teach your children now.
A financial education is key to encouraging engagement from a young age
Financial education at school level is a devolved matter, but, according to FTAdviser, it may well be a subject that UK nations are struggling to teach.
The report finds that only 38% of 14-25-year-olds can correctly identify current ISA limits, while just 46% understand inflation.
Despite the government confirming that “financial capability” is included in the Scottish curriculum for pupils aged 3-14, the reality across classrooms might be different. The same government paper finds that:
- Just 41% of young adults are considered financially literate
- 61% don’t recall receiving financial education at school.
Parents are clear on the importance of financial education. A recent Nationwide report from May 2024 concluded that:
- 59% of parents place personal finance above maths and digital skills in terms of educational importance
- 96% say personal finance education is important but a massive 84% say their child hasn’t received any.
Your children’s level of financial education could have serious consequences for you. The Office for National Statistics confirms a 13% rise in adult children living at home over the last decade, largely due to the need for financial support.
Education is important when it comes to legacy too, with the great wealth transfer well underway. The Kings Court Trust confirms that £5.5 trillion is set to be passed down through the generations over the next 30 years. You’ll want to know that your money is in safe hands.
5 simple ways to help your children become money-savvy now
- Put your child in charge of budgeting for the day
The simplest financial lesson to teach children is how to budget with the money they have. This encompasses basics like the concept of “value” and what happens when money runs out.
You might start by giving your child pocket money and allowing them to spend it as they wish. When their money runs out, so does their ability to spend.
Once they get to grips with this, you might put them in charge of a larger budget, letting them plan and manage a family day out. This will help your child to grasp how much things cost in the real world.
- Introduce the concept of saving
A weekly allowance can be used to introduce the concept of saving. If your child wants to buy something that costs more than their weekly income, they’ll need to save.
Putting a portion of their pocket money aside each week will force them to think about how long they can wait for their treasured item, and how much of a sacrifice they’re willing to make in the present for the promise of future gains.
Separate money boxes for disposable income and savings could help here. You might even up the ante by offering interest on their savings pot, helping to develop their knowledge of key financial concepts.
- Use household chores to reinforce the idea that money must be earned
When your children are young you might provide pocket money as a means to get them thinking about finances in general. As they get older, though, it’s important to introduce the concept of earnings.
You might start simply, by paying pocket money only if they keep their bedroom tidy. Later you can add chores to the list of tasks they must complete to earn their weekly allowance.
This is a valuable lesson that also begins to instil the importance of a good work ethic.
- The difference between needs and wants
Thinking about the difference between what we want and what we need is a key component of sensible budgeting. It could also be a key lesson in keeping your child out of financial difficulty in later life.
Help your child understand the difference between costs associated with food and clothes and bills, and those for holidays and toys.
While it is important to spend money on both, if you can afford to, it’s the needs that must come first. Budgeting only begins when you know what you’ve got left.
- Use games to make sure money lessons are fun
Finance is a serious, and often complicated topic, but money is also about being able to afford the possessions and experiences you want and having fun.
Encourage your children to play “shops” and when they get older, introduce games like Monopoly… if you dare. Kids are very quick to pick up new games and you might be bankrupt sooner than you think.
Another classic board game, The Game of Life, leads players through a whole lifetime, with lessons on everything from saving to retiring.
Get in touch
A grasp of basic financial concepts is a key part of your child’s education but with schools currently falling short, you might opt to teach these lessons yourself. And in the meantime, if you have any questions about your current savings and investment plans or your long-term goals, get in touch. Please email us at beyourself@murphywealth.co.uk or give us a call on 0141 221 5353.
Please note
The information contained in this blog was correct at the time of writing and may be outdated at the time of reading.
