Whose responsibility is it to teach your children the financial skills they will need in later life?
New research from a pension specialist has revealed that 94% of UK parents want their children to be taught more financial skills at school as part of the curriculum.
Almost three-quarters of parents quizzed in the Portafina study believe their children would benefit from learning about issues such as pensions and saving at secondary school, with one in four saying that schools should start teaching financial management at primary level.
Two-thirds of UK parents wish they had been taught financial skills at school
While most parents want their children to learn financial skills, nine in ten of them don’t believe it is their responsibility to teach these skills to their children, believing that it is a school’s role to provide this advice. That’s one of the outcomes of a survey into financial education which also found that more than two-thirds of Brits believe that learning about money at school would have helped them in later life.
The survey revealed that the top seven financial skills that UK parents wish they had learned at school are:
- What a pension is and what the future benefits are (32%)
- Basic budgeting and financial management (28%)
- Ways of saving (savings accounts, ISAs etc.) (28%)
- General investment knowledge (27%)
- How interest rates work (23%)
- What a mortgage is, how they work, and how you apply for one (21%)
- What tax and National Insurance are (21%)
Most people want to see schools take on a role in teaching financial skills to young people. However, there are lots of ways that you can teach money management to your children and help them to understand the financial products they may turn to as adults.
An M&G Investments survey found that 83% of parents recognised the value of teaching their children about money. So, if you want to give your kids a great financial start, here are three ways to teach some basic financial skills.
1. Save v Spend
Teaching the concepts of spending versus saving is something that you can do with your child from a relatively young age. By introducing the concept of ‘earned’ pocket money and encouraging your children to save some or all of this money, you can instil good habits.
Show your child how they have to put away some of their pocket money every week or month to afford to buy a more significant item. The concept of ‘delayed gratification’ is an important one in money management. As well as providing a valuable lesson on budgeting, your child will also start to learn the value of the items that they are saving up for.
You could even consider providing an incentive – for example, doubling any savings your child makes over a fixed period – to encourage them to put money aside.
The flip side of this is teaching your child about borrowing and interest. If they want to buy an item they can’t afford, you could consider lending them the money at a fixed rate of interest, so they know how much they pay back.
Here, you can teach them about ‘good debts’ (borrowing money to buy an investment such as a house) and ‘bad debts’ (borrowing money to buy a piece of tech).
2. The value of shopping around
One way that you can help your children of any age to manage their money successfully is to teach the value of shopping around.
When a younger child has decided to save up to buy a more expensive item, take them to several shops before you buy the item to show them the difference in price. Buying in one store rather than another might mean they can buy their chosen item a few weeks sooner!
Encourage your older children to prioritise a regular review of their arrangements. Instil in them the need to shop around when their home or car insurance is up for renewal. Make sure they regularly review their mortgage to ensure they are getting the best deal. And help them to understand that switching bank account, credit card or utilities provider can also mean they save money.
3. Long-term saving and pensions
Teaching your children about pensions has loads of useful benefits, including:
- How compound interest works
- How a small amount can grow significantly when invested for the long term
- The concept of risk, as the value of the investment can rise and fall over time
You can show your child how much better a pension fund has historically performed than a savings account, although there are no guarantees. Indeed, you could consider setting up a pension for your child. You can pay up to £2,880 each year into the pension of an under 18-year-old, and with the £720 tax relief the pension provider claims from the government, your child’s pension fund could grow by £3,600 every year.
Remember that one of the downsides of this approach is that your child won’t be able to access the pension until they come to retire later in life. They won’t be able to take it to fund the deposit on their first house or university tuition fees, for example.
Help your children with the advice they need
However old your child is, and whatever stage of life they are at, financial education can ensure they make better decisions. If your child needs advice on their pensions or savings, we can help them. Ask them to email firstname.lastname@example.org or call (0161) 8080200 and we’ll be delighted to help.
Please note:A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.