Financial Education | Why Children Must Learn It
Updated: Sep 26, 2020
By the age of 11, children are able to open a bank account and have a debit card and by the age of 18 they are able to apply for credit cards and loans. For many, they will need to make decisions about future career paths, jobs, student loans and independent living. Therefore, the need for young people to have a firm grasp on their financial decisions has never been stronger.
Learn about finance from a young age
It is essential for children to be educated about finance from a young age as evidence suggests that children’s attitudes about money are well developed by the age of seven. At primary school, we begin talking to children about money. Children develop an understanding of coins and notes and their worth. They begin to understand situations which involve totaling amounts and working out change.
Why financial education is important
Children and young people who have had financial education at school are more likely to have good money skills. It gives children the skills they need to make the most of their money, plan for the future and avoid getting into problem debt or experiencing financial exploitation. Research suggests that children who have greater financial literacy are more likely to have a bank account, save and have the confidence to manage their money.
How we teach financial education
At Tech Tutors, we embed financial education into our lessons. By doing so, it can help to bring subjects like maths to life, making the learning relevant to students’ everyday lives.
What is taught in financial education
Pupils should be taught about the functions and uses of money, budgeting, managing risk, credit and debt, insurance, savings and pensions, financial services and applying maths to financial contexts. It is important to break down these topics and teach them one at a time so that they don’t become overwhelmed. By introducing the topics slowly, we ensure they fully understand each topic. There are four main topics: how to manage money, becoming a critical consumer, managing risks and emotions associated with money and understanding the important role money plays in our lives.
How to manage your money
One of the key terms we look at is ‘credit’. Children need to understand the difference between ‘in credit’ meaning the money you have available to spend and ‘credit’ meaning the amount of money owed or borrowed. It is important for children to understand how to read financial documents such as bank statements so they can set, track and manage their spending effectively.
How to become a critical consumer
One of the key learning points is being able to distinguish between wants and needs. We all need the basics such as food, shelter and clothing. Whilst eating dinner each night is a need, eating out at a restaurant is a want. The same is said for clothing, whilst a new pair of trainers may be a need, an expensive pair of designer trainers is a want. This is not to say that you can’t have what you want but it is important that children are able to budget efficiently to ensure they have enough money to cover their needs first. It is then their decision to either spend the remaining money on wants or to save the money.
It is also important to be a critical consumer when it comes to choosing financial products. Children need to be able to work out which financial products are best for their needs and circumstances and those of others by considering interest rates, access to money and account features.
How to manage financial risk
It is important for children to understand how to protect their money and identity when undertaking financial transactions. Children will also begin to evaluate the risk and rewards when it comes to saving, borrowing, investing and gambling.
Understanding the important role money plays in our lives
Children are taught to estimate and calculate take home pay for different occupations and for people in different circumstances, including deductions such as income tax and National Insurance.
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