Money skills are a vital part of everyday life – and new research underlines why it pays to start learning from an early age.
The government-backed Money Advice Service (MAS) has found that children whose parents involved them in discussions and decisions about money and allowed them to experience using money from as young as four years old, are more likely to develop vital financial skills.
These skills can have a big impact on their ability to save, budget and plan ahead financially in adult life.
Kirsty Bowman-Vaughan, a children and young people expert at the MAS, says parents shouldn’t be afraid of starting money conversations from an early age.
“We know that parents might feel as though they’re protecting their children by not talking to them about money,” she says. “Yet helping children to understand how to save and handle money is one of the most important things they can do to ensure their children’s long-term financial security.”
The MAS found children who didn’t have a say in spending their own money were less likely to save.
When 12 to 17-year-olds were asked how they would use £100, those whose parents decide how their money is spent were likely to save the smallest amounts – typically around £53.65. Those whose parents included them in money discussions were likely to save an average of around 20 per cent more than this, the research found.
Young people in this age group whose parents decide how they spend their money were also nearly five times more likely to say that borrowing money didn’t bother them – even if they had no plans to pay it back – at 19 per cent, against 4 per cent who make spending decisions on their own or with their parents.
The MAS says parents have a key role to play in helping their children learn the basics of money management. Nearly three-quarters (74 per cent) of children say they talk to their parents about money.
But a quarter (24 per cent) of parents surveyed thought they should wait until their children were in secondary school before teaching them the importance of saving.
A further 31 per cent of parents of 16 to 17-year-olds say they don’t set and stick to money rules with their teenager. And 17 per cent rarely or never speak to them about the risks of getting into debt.
So how can you start a conversation about money with your child?
Among the ideas put forward by the MAS, was to give younger children the chance to pay for items. Instead of buying treats during the supermarket shop, give them a set amount of money and explain to them that they can choose what they want, but when the money is gone, it’s gone.
Children should be included in discussions about bills. You don’t need to go into the full details of your finances, but give them an idea of how household finances are run. Explain payments like direct debits. Frame it in a way they can understand – tell them the money is helping to keep the lights on, for example.
The MAS also suggested that if children were given pocket money, they should be encouraged put some of it aside as savings. Consider opening a savings account for your child and include them in trips to the bank or building society to build up their savings pot. Also include older children in conversations about online and mobile banking.