Many adults admit that financial problems are a big contributor to poor mental health. The current situation we find ourselves in due to coronavirus has understandably given rise to many more finance-related anxieties, affecting a larger proportion of people than ever before.
Many adults also admit that they find it hard to talk to their children about money, and don’t know where to begin with explaining monetary concepts to them. We know from multiple studies, however, that the earlier a child begins to learn about finance, the more successful their approach to finances in later life will be. This is crucial in ensuring that our children are as well-equipped as they can be to deal with any future unprecedented economic crises.
Financial literacy is currently not compulsory on the primary curriculum in the UK, but research from HSBC shows that financial behaviours in children begin to develop at seven-years-old. With the majority of school children now learning at home under the supervision of parents, it’s the perfect time to introduce that education and talk to them about finances. Understanding the value of money is a key literacy skill throughout life.
But how exactly should we introduce monetary concepts to children? How can we shape appropriate conversations around it, and when? The underpinning concepts of financial education are resources, scarcity and value; these are the foundations on which financial literacy will be built.
There are age appropriate activities you can do with children where you can start to introduce these concepts. For example, with a seven-year-old, you could look at the contents of the recycling bin and talk about which items might be worth more than others to help them learn the concept of value – something you may have previously struggled to find time to do.
Where possible, these financial conversations should be incorporated into daily life. In normal times, the weekly food shop presents an opportunity to talk about pricing, as well as value, quality and special offers. In the current circumstances, it could be a good opportunity to talk about scarcity and how that impacts price. For example, it’s now difficult to get hold of certain products in supermarkets, but you can get them from some online retailers for an inflated price.
A bit further down the line, at around nine-years-old, it’s a good time to start talking to children about managing money. This could be encouraging them to save pocket money if there is a new game they want to buy, or if appropriate, explaining why you might be paying more attention to budgeting at the moment.
This stage in a child’s development is also a fantastic opportunity to do something a little more ambitious. A few years ago, I did some work with the global non-governmental organisation Aflatoun, which is committed to bringing financial, enterprise and social education to children aged three to 18-years-old. We worked with UK schools on an enterprise competition, to try and make concepts of money management fun. The children were tasked with coming up with an idea for a small business, which introduced simplified notions of outgoings, mark-ups, and profit. By shaping conversations about finances around engaging activities, it makes the learning experience more likely to ‘stick’. This type of activity could easily be incorporated into a maths lesson at home.
Establishing these basic foundations mean that later, you can build on that to talk about more advanced concepts such as savings, budgeting, borrowing and investing.
Avoiding speaking to children about finances because you feel you don’t know how to approach it results in children being ill-equipped to deal with financial situations in later life. Just as we teach them about manners, safety, and health, we also need conversations about money. This has never been more important.
Hitul Thobhani is an author and expert in teaching young people life skills, having founded children’s wellbeing company Kidz4Mation, and later Empowering Kids and Youth, which was the UK partner for Aflatoun’s financial literacy programme.