Money skills matter
You might feel a bit odd talking to young children about money. After all, they’re not usually responsible for paying bills or buying food, and we all want them to have their time just being children.
But young children grow up into older children, then teenagers, and then adults. And somewhere along the way, they start being responsible for making some financial decisions. It might start out as what they can afford to do when they’re out with friends, or buying a new game, or perhaps managing their phone bill. As adults they will be expected to manage earnings, taxes, and credit cards, make decisions about rent and mortgages, and think about pensions.
We need to set them up for success in those decisions that they will have to make. Understanding the concepts behind money are crucial for that. The evidence suggests that children who have discussions about money with their caregivers from a young age are more likely to manage money better when they’re older.
So, let’s not shy away from having those conversations with our children.
Financial literacy and what it means
Financial literacy simply means having the ability to manage your own money and financial affairs, according to your aims. Exactly what each person needs to know will depend on that person’s aims at their current stage of life. Are they saving up to buy a house? Then they need to understand different types of savings, budgeting, mortgages, insurance and more. Are they looking to save for a big holiday? Or are they looking at more complex topics like tax optimisation, stocks or shares and inheritance planning? These are all different levels of financial literacy.
​
Financial literacy for young children is likely to start with understanding what saving and spending is, and learning how to budget and prioritise spending. What do they need? What do they want? But these conversations about money are also an opportunity to introduce some of those more complex concepts, and the older they get, the more concepts they can understand. So how do we know what children are ready for in terms of financial literacy?
​
Here at The Hoard Book, we believe it all starts with conversations. Talk about the money decisions you make with your children, and see what questions come up. Don’t shy away from their questions – you don’t have to give them exact numbers, but instead focus on the concepts. ‘If we buy a new Playstation we will have less money for a day out on holiday. Which is more important?’
​
Children who have money skills get long lasting benefits:
​​​​​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
Having money skills also gives your children physical benefits. You probably know that money has an impact on your health. Money worries and stresses impact your mental health. As for physical health, people with higher incomes have better health - in the UK 44% of people on the lowest incomes rate their health as fair, bad or very bad (‘less than good’). In the middle this figure is 25% and for people on the highest incomes the figure is 12%. The reasons for this are complex, ranging from access to healthcare, good housing and good food, to the impact of stress on physical health.
​
But a 2022 study published in the Journal of Family and Economic Issues found that your income wasn't the only thing about money that impacts health. They found that being more able to manage your money had a positive impact on health. And they found that that effect existed regardless of your income, or your ethnicity, gender, education or employment.
​
In other words, the skills you have in managing money the healthier you are. So if you needed another reason to equip your children with those money skills, there it is.
