Whether or not the UK schools remain closed, financial education for young people has long been an overlooked subject, living in the shadows of the core curriculum subjects. But this current crisis has shone a sudden and unexpected light on the lack of financial resilience amongst the UK population, and has highlighted the importance of personal financial management. Many parents have struggled to home school their children during the lockdown, but here are some simple, informal, and useful exercises that parents can demonstrate to help develop healthy money habits:
- Personal Budgeting – get children involved in making the household budget. Building a budget encourages children and adults to take a close look at their spending habits. This could be introduced from an early age via (a real or online) trip to the supermarket. Perhaps you could give them a set amount of money to see what they can buy within the budget. Personal budgeting is a very underused aspect of personal finance, but it can be a hugely important tool in your financial plan
- Cut down on invisible and unnecessary spending – an advantage of making a budget and tracking your spending is seeing exactly where your money is going. People spend a lot of money on things they do not need; encourage children to track their spending and challenge them to find better deals on mobile phone and utility contracts. Give them the responsibility of being the in-house savings expert
- Debt, and the dangers associated with it – talk to your children about your own experiences with debt. Explain what interest and APR is – this will be particularly beneficial to older children who might be about to leave home, or take on student loans. Develop their understanding of the two Cs: compound interest and credit cards. It will be massively advantageous if they can understand the power of the former and the dangers of the latter
- The UK Income Tax and National Insurance system – particularly timely at the moment due to the NHS funding which has been in the spotlight during this crisis. Teach children the importance of paying taxes, who they go to and why, and how much tax is paid in terms of different earnings levels
- Earning money as wages – as well as giving them weekly pocket money, parents can pay their children for completing tasks and chores (if the household budget allows). Parents may have mixed feelings about monetising chores, but it helps youngsters learn where money comes from, that it must be earned, that it does not necessarily come easily, and that it has to be taken care of
Many people may want to keep financial discussions private, especially in the current financial environment, but talking about money with young people shows that money is not a taboo subject. Teaching your children at home offers a great chance to improve their financial understanding and equip them with the money skills that will benefit them for the rest of their lives.