At what age do kids need to start learning about finances? Not simply the concept of money, and the fact that we need to exchange money in return for items that we need or want, but personal finances and financial wellbeing.
Well, a recent report from the House of Lords select committee on financial exclusion suggests that children as young as five need to be having lessons that deal with these topics. The intention would be to cement fundamental knowledge about personal finance and ensure that more people have the information needed to make informed decisions about their own financial situations.
This makes sense, considering that some research has shown that a person’s attitudes towards money and finance can be cemented as young as seven. A typical financial education, relatively unstructured – at least until high school – doesn’t necessarily give children a rounded enough sense of the importance of money in our everyday lives.
As an example of a learning opportunity that is suitable for the very young children that the report refers to, the committee cited the example of schools that run their own ‘savings banks’. Baroness Tyler, in charge of the select committee, suggested that this is one effective way of helping younger children understand the message.
From the point of view of a parent, then, what are the most important lessons that you can be teaching your kids to ensure that they grow up into financially savvy adults?
According to financial writer Beth Kobliner, the most important lesson for 3-5 year olds is that you can’t necessarily have the things that you want immediately; you have to learn to wait. In particular, she suggests: that you ‘Have your child set a goal, such as to buy a toy. Make sure it’s not so pricey that they won’t be able to afford it for months. Then it just gets frustrating, and it gets hard for them to wrap their head around. You want to set them up for success’.
As they get older, you can then start to bring in additional lessons, such as the fact that they will sometimes have to choose which purchase to make, and the fact that storing money away in a savings account will allow them to build interest. These types of lessons at a young age ensure that you have something to build on when it comes to learning about more concrete matters like credit cards.
The select committee’s report raised a number of concerns, including the fact that banks are able to charge what the committee described as a ‘poverty premium’, with costs often affecting the poorest borrowers. They also highlighted the fact that branch closures mean that some vulnerable people without internet have less access to support, and suggested that banks should be seen as having a duty of care to their customers.
While teaching children more about money certainly won’t fix these issues, it may help set up a generation of more savvy spenders.
