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What Schools Should Be Teaching Kids About Money (and aren’t)

kis and moneyThe school day is relatively short, so it’s natural that some subjects will get less coverage than others. But the financial education of children has often been sorely lacking, with teachers leaving it up to parents to teach the fundamentals of how to save and spend safely. With the rocky economy we now find ourselves in, it is more important than ever that kids are taught how to be financially self-sufficient. Here are the three things we think they should be teaching about money in schools, and how you can help your kids in the meantime.

 

Not all savings are the same

ISAs, Bonds, Instant Access Savings, Notice Accounts… Even as an adult the choices can be confusing. So why are we suggesting these tricky concepts should be introduced to a child? Because when the Channel 4 programme SuperScrimpers asked people on the street, many had not even heard of ISAs, let alone knew the differences between each version. We’re not suggesting your kids should have an in-depth knowledge of each savings account, simply that they know they have options.  And if you sit down with them next time you’re thinking about changing accounts, and talk them through what you’re doing, they will quickly learn how to go about researching their different choices.

Money doesn’t just come out of the Hole in the Wall

There was once a little boy who wanted a new toy. He asked his mum but she said she couldn’t afford it right now. The little boy thought about this for a moment, and then piped up happily, ‘we can just go and get some from the hole in the wall’.

What’s the lesson from this tale? Well, firstly it shows that kids are exceptionally optimistic. But more importantly it reveals the lack of awareness often shown by children about where money comes from. And the problem is growing rapidly due to the onset of credit and debit cards: teachers have reported that those kids whose parents pay predominantly by card are less aware of the value of money than those whose parents still hand over notes and coins.

Once they’re old enough, encouraging your children to take a part time job is one of the best ways to teach them where money comes from (and they will soon see how quickly it can be spent). But to help earlier on, make sure they are introduced to physical money, and talk with them about where your earnings come from. Even playing with the fake money in board games can be educational, but as you play, please remember…

Saving all your money isn’t always the answer

Don’t get us wrong; encouraging a savings habit is hugely important. But growing up with the constant message that you can never touch your money can be just as harmful as the idea that constant spending will fix everything. Some people have been known to save and save, whilst never feeling they could actually spend any of their hard earned cash. Such an attitude can encourage stinginess and create continual dissatisfaction with what you already have. A controlled spending habit, where you set boundaries and create goals, is one of the best ways to foster a healthy attitude towards money.

Are there other key lessons you think schools should be teaching kids? Let us know below.

Not just another piggy bank…

We posted recently about the importance of teaching children about money by handing them physical cash rather than transferring it in the virtual world. And one of the best ways to encourage saving is to be able to see your savings mounting up in a trusty piggy bank. But the traditional piggy bank has been joined by hundreds of new incarnations, all promising different ways of making saving fun and educational. To save you searching through hundreds of web pages, we’ve brought together five of the best ones for you – so you can save your time as well as your money!

cat 

The cute one

The best way to encourage saving is to make it fun, which is exactly what this delightful money box does. Place a coin on Crafty Cat’s dinner plate and watch as he pops up and takes your money. Kids and adults alike will love this adorable moneybox.

Peers Hardy Crafty Cat Bank: £11.99, amazon.co.uk

paint piggy

The arty one

Here at The Financial Fairy Tales we love teaching financial responsibility through creativity. Which is why we love this paint-it-yourself piggy bank. Complete with paints and brush, your kids will love coming up with their own designs, encouraging them to take pride in their savings.

The Dream World Piggy Bank: £6.99, smythstoys.com

count jar

The practical one

What better way to foster a savings habit than to watch your money adding up as you go along. This coin counting jar automatically registers the value of each coin added and tots up the total on its digital display. This clever contraption helps coin recognition and also encourages regular saving as children can see how close they’re getting to their savings target.

Peers Hardy Coin Jar: £14.95, amazon.co.uk

safe piggy

The ‘secure’ one

The perfect choice for the high-tech child or those with a mind for safety, those clever people at the Science Museum have come up with this touch screen safe. Accessed with a 4 digit pin number, this is a great way to teach lessons about security, and an easy way to introduce the safe use of pin numbers.

Science Museum Touch Screen Safe: £35, sciencemuseumshop.co.uk

magic piggy

The magic one

Encourage your kids to save whilst sparking their curiosity with this clever optical illusion. Coins dropped through the slot in the top appear to magically disappear. Sure to be popular with all budding magicians, your child will enjoy figuring out the secret behind the box (spoiler: it’s all to do with mirrors). Whilst the mechanism for the optical illusion means there is a rather limited space for coins, this is still a fun way to spark a discussion about saving habits.

Magic Money Bank: £4.99, amazon.co.uk

Children and Parents at Odds Over Their Financial Futures

SURVEY SHOWS STARK DIFFERENCES BETWEEN PARENTS’ AND CHILDRENS’ VIEWS OF THEIR FINANCIAL FUTURE

59% of parents believe their children will be financially worse off than them in the future

On average children believe they will earn £56,000 aged 35 – twice the average wage

Only 5% of adults share children’s optimistic views about their future earning potential

New data released by RBS shows that adults overwhelmingly think today’s teens will be worse off in the future. Children on the other-hand expect to earn twice the average wage. The stark differences have been highlighted by the RBS MoneySense Research Panel, which is part of the Bank’s financial education programme, and has surveyed over 50,000 children over the last 5 years.

The 2011 findings of the MoneySense Research Panel also indicate:

  • English teens expect to earn most (£57,000), compared to those in Northern Ireland who anticipate earning £39,000. Both are significantly above the actual rate of £24,000.
  • 9 in 10 children think it’s important to learn about money, and are more concerned about debt than any other year since 2007.
  • 71% of young people would like their parents to teach them about finance.

This strongly contrasts with adult’s opinions:

  • The majority of adults believe teens will be earning £25k at the age of 35.
  • Nearly 80% of parents don’t consider money a top priority to discuss with their children.
  • Despite teens wanting to talk to their parents about finance, only 36% of adults actually feel qualified to discuss it.

Andrew Cave from RBS Group Community Affairs said:

‘We know from our research that children want to learn about money, and we know that they instinctively look to their parents. But we also know a lot of adults don’t feel comfortable talking about money with their children, only 18% of them could very confidently describe what an APR is. That’s one of the reasons why RBS believes it’s more important than ever to educate young people about money in the classroom. We believe every child should leave school armed with the ability to manage their money and the skills to make the best financial decisions for their future.’

MoneySense Research Panel

This report is in its fifth and final year and in total has interviewed over 50,000 young people up and down the country. The aim of the five year project has been to speak to children between the ages of 12 and 19 to discover their opinions, attitudes and understandings of cash and how it works in the modern world.

Some of the key regional differences and trends since 2007 are charted here:

Regional Differences

Country Salary expectation aged 35 Reality
England 57,200 Current UK median salary aged

30-39 is £24,316. That’s a

difference of £32,074.

Northern Ireland £39,600
Scotland £53,600
Wales £46,600

Future Debt

Country Expectation of Debt Reality
England 37% Students starting university in 2012 should   expect their average debts to reach £53,400, according to the latest PUSH   National Study Debt Survey.
Northern Ireland 32%
Scotland 24%
Wales 30%

Money Management

Country % who learn about money

management

Reality
England 45% MoneySense has reached

70% of all secondary schools

since 2005 and taught over

2.5m young people.

Northern Ireland 56%
Scotland 57%
Wales 47%

Key trends across the last 5 years.

Learning about,

and keeping

track of money.

90% of young people are keeping track of their   money, up 10% on 2007 figures.

More than half of children used formal methods of   keeping track of money between

2007 and 2011.

90% thought it was important to learn about money   an increase from the

previous year.

Debt In 2007, 24% of young people thought they’d have   no debt by the age of 25. By 2011

this figure had halved to 12%.

More forms of debt were identified by young   people in 2011 compared to 2010.

Expectations of £30,000+ debt after university   increased, particularly in England:

8% to 33%.

Pocket Money In 2007, 27% of young people earned their own   money through a part-time job. This

Figure had reduced to 20% by 2011.

In 2007, 71% of 16-19 year olds and 89% of 12-15   year olds received pocket money.

In 2011, 79% of 16-19 year olds and 85% of 12-15   year olds received pocket money.

Savings Around a third of all young people had saved for   their longer-term future in 2008

(34%). This increased to 37% in 2011.

The percentage of young people who believe ‘It’s   important to Save’ reached 85%

in 2011.

3 Money Lessons for Your Teen

Teaching children budgeting is like riding a bike. You gradually show them how to do it and once they learn it, they are on their own without your support. After that, they will never forget how to ride a bike. After all, you do want your child to have a great annual credit report to present whenever required. So, given below are a few approaches you may adopt to make your budgeting lessons more effective for your child:

3 Money Lessons for Your Teen - young woman at a cash machine image

1. Give Your Teen A Debit Card – Start with a debit card and gradually progress to credit cards. He will have a limited amount that he can use and has to manage in it. Giving your teenage child a debit card will teach him to budget his expenses. When you receive the statement, sit with him and review it. Discuss what was essential and what expense could have been avoided. He will soon learn the art of budgeting.

2. Add Him As An Authorized User To Your Credit Card – After he learns how to budget his debit card and has managed his account successfully without any overdraft fees, you can take your finance lessons to the next step. Add your teen child as an authorized user to your credit card. There are two benefits to this. The first is that he will have a credit history and the second benefit is that he will learn the intricacies of managing a credit card.

Explain the details of credit, with an explanation of interest rates, APR, how to repay his bills and how he can find out errors in credit card bills. Teach him to consider all these factors when he makes purchases. This is also the right time to give him lessons on credit report and credit score and how credit card bills affect them. Explain how a low credit score can make him pay high interest rates when he will want to take a car loan for his car purchase later on in life among other things.

3. Let Him Prove That He Is Financially Responsible – Now that he has a steady income and has proven that he can manage his expenses, it is time to set him free. Let him get his individual credit card and start building a credit history. You have taught him well and it is now time for him to prove that he is financially responsible.

Credit lessons begin early in life. You can teach your child how to manage in a limited budget and then supervise them. They are going to need these lessons in future.

Making Finance Fun in Primary Schools

Here is an article recently published in Primary Teacher Update exploring how primary teachers can teach younger children about money.

Summary
However you approach financial literacy, remember the three essential
elements – make it Relevant, Appropriate and Fun.

Teaching children about money does not have to be complicated, full of difficult maths or require you to be an expert.

Helping them develop the essential life skill of managing their money is both rewarding and enjoyable. It is also worth remembering that one day their taxes will be paying for your pension!

Resources available
 A good place to start is the pfeg website (www.pfeg.org.uk). This is a charity set up specifically to help teachers deliver financial education. It can provide guidance, materials and even experts to come and visit the school. All the recommended resources have been assessed and passed as fit for use in the classroom.
 Many high street banks and building societies offer financial literacy programmes. It can be helpful to have a member of their staff visit and talk about what they do. Be careful, however, that they are promoting your agenda as well as their own.
 The Financial Fairy Tales are a series of books accompanied by activities and a teachers’ guide. They are designed to make learning about money fun by presenting values and techniques through stories and activities.

A free story and sample materials are available to readers from
www.thefinancialfairytales.com/ schools.

Please share with your colleagues and feel free to leave your comments. The full article can be downloaded below:

Financial Fun in Primary Schools