Most parents talk to young children about money, often without realising it. With every game of shop, each time you encourage them to hand over cash or collect change when paying for ice creams, and whenever a grandparent presses a pound coin into their palm, they’re becoming more familiar – and more confident – with handling coins and notes.
Unfortunately, for too many children, this is where their financial education ends. Many parents tell us that, once their kids have grasped the basics, they don’t know how to explain more complex topics like budgeting, credit and investments. And, as there’s no consistent approach to financial education on the curriculum, many teachers don’t have the time or resources to step in and continue the conversation themselves.
Is financial education taught at school?
It might surprise you to know that there’s no statutory financial education provision for primary school children, even though organisations such as the Organisation for Economic Co-operation and Development (OECD) recommend that it should start as early as possible – not least because Cambridge University research indicates most money habits are set by the age of seven.
In 2014, financial education was incorporated into the national curriculum for secondary school students. Although this was a step in the right direction, provision differs across nations and not all schools (including academies, free schools, independent schools and homeschooled children) are required to adhere to the national curriculum.
While some primary school children learn about Money Matters as part of personal, social, health and economic education (PSHE) in KS1, others might have to wait until they start secondary school – and then some might miss out altogether. This is why in 2021, the All-Party Parliamentary Group on Financial Education for Young People concluded that the current delivery of financial education across the UK was 'patchy'.
Why is it important to provide a financial education?
We now live in an increasingly cashless society that’s very different to the one we grew up in. This presents a new set of challenges and means that kids need to understand the value of money and learn how to manage it in a digital world.
Of course it’s still useful to teach kids how to handle coins and notes, but they also need to grasp that in a digital economy our money is increasingly ‘invisible’. Our children grow up watching us ‘tap to pay’ for groceries, shop online for items that are delivered to our door, and watch TV via streaming subscriptions. As they get older, we treat gaming fans to ‘skins’ and in-game currencies that only exist (and have value) in video games – so it’s little wonder that many kids don’t realise that these in-app purchases cost real money, and can easily leave their parents out of pocket.
Fast forward a few more years, and our kids will leave school, start their first jobs, or head to university – all while navigating different types of credit, including student loans, and the temptations of Buy Now Pay Later.
At GoHenry, we believe that helping young children learn how to manage their money is the first step towards financial literacy – which gives them the ability and confidence to make informed financial decisions.
Learning at the age of six why it’s not the best idea to blow all their pocket money on sweets and stickers, or understanding at the age of 10 that saving money is the key to getting their hands on a new gaming console are financial lessons that will last a lifetime.
The benefits of financial literacy in childhood
It’s never too early to start building children’s financial literacy – especially as this yields benefits that extend all the way to adulthood. Our research shows that financial education not only teaches kids to manage their money, but can also help them to earn more of it.
- Higher earning potential: Our research, conducted in partnership with Censuswide and Development Economics, found that 77% of adults earning £55,001-£65,000 per year received financial education as a child, while almost half (46%) of those who didn’t are earning £15,000 or less per year, which is less than half of the national average income.
- Less chance of debt: Adults who don’t learn about money when they are young are less able to save and more likely to fall into debt, with 79% saying they have fallen behind on energy bills or council tax payments over the last six months.
- A bigger pension pot: People who received financial education as children are saving, on average, 44% more into their pension pots each month compared to those who did not benefit from financial education at school.
- More savings: Over half (51%) of those who received financial education as a child have up to £5,000 cash savings compared to almost a third (30%) of those who didn't.
- A healthier economy: Prioritising financial education could add an extra £6.98 billion to the UK economy each year. If all adults had the opportunity to receive financial education, this could amount to an additional 76,400 businesses being formed each year – creating 123,000 direct jobs and reducing unemployment by 8%.
We believe that financial education requires collaboration – it’s not the responsibility of one group but requires input from government, schools, teachers, families, businesses, universities and community organisations.
This is why we commissioned CBI Economics analysis, in partnership with Wilson Wright, in a bid to help improve the nation’s financial literacy. The resulting report Paving the Way to Financial Wellbeing - which we took to the government - shows how financial literacy can unlock a bright and prosperous future for your child, and raise early-career earning prospects by up to 28%.
We’ve also joined the Centre for Financial Capability, of which I am a trustee, to support their push for high-quality and effective financial education from primary school age.
How can GoHenry help boost your child's financial literacy?
While it's a known fact that financial education at school can improve money confidence, we know financial education is even more effective when supported by parents and experiential learning.
This is why having regular conversations about money, spending and saving works. Alongside this, giving your child pocket money from a young age and using a prepaid debit card will help them to put the lessons they learn at school – and from you – into practice.
From spending and saving to budgeting and learning the value of money, experimenting with their own money helps bring home the key lessons of financial education, enabling them to go out into the world as financially confident and capable adults.