Financial Education:The importance of knowing the basics from an early age

Added 9th April 2019

Financial Education: The Importance Of Knowing The Basics From An Early Age

Educating our children about the world of financial management is rapidly becoming one of the fundamental pillars of a child’s education. Today, only 40 percent of 7-17-year-olds have accessed any financial education in school. With personal debt increasing at a staggering pace, the time has never been more perfect to support the inclusion of financial education in childhood education. This is an opinion that an increasing percentage of the United Kingdom are starting to agree with; 54 percent of parents want more time spent on the subject of money management in school, according to an MUFG study. The increasing attention and light being shed on this topic leads us to ask one question: What can teaching financial education at a young age achieve? More importantly, how can an education about personal finance help to avoid the common financial traps being experienced today and aid people to get their lives back to normal after a set-back?

Financial Education Equates To A Good Financial Foundation

Children learn financial habits from 7 years old, according to 2018 research by Young Money. However, a common argument has been whether teaching them financial management skills at such a young age can make a difference in their financial life in adulthood. Having the correct concept of money opens the door for children to learn good financial habits, such as budgeting and saving from a young age. With more of the younger population accruing debt, entering adulthood armed with the correct tools to manage their money starting from their very first job or even as early as secondary school means children are more likely to make better decisions when it comes to finances.

As of 2017, 29 percent of young men and 40 percent of young women were more likely to find themselves in a tough financial position. Therefore, employing strategies such as budgeting and comparison shopping on credit cards and utility bills can prove to be useful to an age bracket of the population with growing debt obligations. In addition, those with poor financial health at a young age are more likely to carry this forward into their later years, family life and even retirement.

Young Financial Habits Set The Tone For Retirement Choices

One alarming long term impact of poor financial literacy that can be noted is the impact it can have on the retirement prospects of the younger generation. In 2018, the Organisation of Economic Cooperation and Development (OECD) highlighted the link between low levels of financial literacy and poor retirement decisions, something that could be rectified with better disclosure, simplified decision making and increased information and choice. Knowing about the existence of tools such as investment property profit and financing calculators is half of the fight in combating poor retirement decisions. The other half lies with using them correctly to make good investment decisions beforehand, a skill that is better taught earlier in life. The ripple impact of a good financial foundation can be seen at all stages of life, and further underlines the place it needs in childhood, adolescence and adulthood.

The Longstanding Battle For Inclusion In The School Curriculum

Financial education became compulsory in the school curriculum in September 2014, and was implemented into the education plan for both primary and secondary schools. Younger students aged 5-14 years are taught about money in their maths lessons, while it is introduced to 11-16-year-olds in their citizenship classes. However, this decision only applied to maintained schools, meaning this implementation was not consistent across England. The inconsistency has led to gaps in the education framework, and shown the need for changes to achieve a more uniform and impactful approach.

Financial education charities and non-profit organisations have taken up the task to address this. Online resource platforms such as Financial Capability Strategy For The UK now allow parents and caregivers to locate nearby financial education services and projects aimed at kids, while others, such as Young Money, have published educational textbooks conforming to the national curriculum to be included on the shelves of public libraries and in schools across the country. Although there are actions being taken and the need has been recognised, there is still a long way to go before we achieve our goals when it comes to educating our kids about the workings of money management.

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