Have you ever noticed how children are taught about maths at school, but they rarely get a chance to learn about money, tax, or saving?
Here’s why financial literacy matters, and what you could do to teach your child about money management.
What is financial literacy?
Let’s start with the basics. According to the Organisation for Economic Co-operation and Development (OECD), financial literacy is a combination of the awareness, knowledge, skill, attitude, and behaviours necessary to make sound financial decisions and achieve individual financial wellbeing.1
Essentially, it’s learning how to manage money so that you can save, live within your means, and reach your financial goals. The thing is, though, financial literacy isn’t something that many of us are taught at school, or even at home, so we often learn it the hard way as adults.
Why is money management not taught at school?
In the UK, only 40% of children and young people say they’ve had some financial education in school2 – which is very low, given that financial literacy was introduced in the UK’s national curriculum back in 2014.3
So why aren’t we teaching kids about money management in school? Well, one of the main reasons seems to be time.
Most schools and colleges are willing to increase the amount of financial education they offer, but in practice, students' timetables are already busy, making it difficult to include it in daily lessons. This is backed up by a survey conducted in February 2022, with 63% of teachers citing a lack of time as the biggest obstacle when it came to creating a financial education programme.4
However, a further 13% also said that they didn't have enough expertise on the subject.
Why does financial literacy matter?
Financial education gives kids the tools to develop good money habits which they can take with them into adulthood. In fact, children and young people who have had financial lessons at schools are more likely to save up regularly, have a bank account, and be confident managing their money.2
A lack of financial literacy makes it more difficult for young adults to take control of their money. And this could have an impact on their mental health if they’re concerned about their financial situation.
As UK mental health charity, Mind, explains, money worries could trigger feelings of anxiety and panic in certain situations, lead to sleep problems, and affect your social life and relationships.5
What could you do?
If your child isn’t learning about finances at school, then it could a good idea to teach them yourself. After all, that’s how most young people in the UK learn about money management. Research from 2023 shows that 68% of students aged between 15 and 18 get most of their financial understanding from home, while only 8% consider school as their main source of financial education.6
So, if you want your child to develop good money habits in future, you’ve got a role to play. But where to begin?
Well, you could start by asking them what they’d like to learn more about. According to a recent study, the main things that young people want to understand are specific financial products (like mortgages, pensions, loans and credit cards), budgeting, debt management, and tax.6
So, why not tackle these topics? Obviously, here we’re talking about teenagers, so if your child is still very young, then you may want to keep it simpler.
Money lessons can sometimes be boring, so make sure you find ways to make it more entertaining. Playing board games, like Monopoly or the Game of Life, could help them learn while having fun.
You may also want to use situations with real money to show them how budgeting works in practice. Every time you put cash aside for something, you could explain why you're doing it, and what you did to be able to save. You might also want to take them grocery shopping with you too.
You could also open a savings account or child's ISA for your kid and get them involved in the journey by telling them why you’re doing it and how much you’re putting aside, as well as showing them what happens to the money in the account over time.
With a Junior ISA, you can save or invest up to £9,000 each tax year (though this is subject to change in future) and your child won’t need to pay tax on any gains their money makes.
What’s more, everything you put in their account belongs to them and nobody is allowed to dip into their pot. The money is theirs and locked away until their 18th birthday. Once they’re 18, they can choose what to do with their money – needless to say, with a good dose of financial education, your child should be able to do what’s right for their future.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.