How families teach children about money

Money Advice Service (MAS)¹ research showed that adult financial capability is linked to what is seen, learned and experienced in childhood and adolescence.²

There is a growing appreciation of the importance of financial education – and that it needs to start early. Ensuring all children and young people get a meaningful financial education, allowing them to manage money well and make good financial decisions later in life, is a key theme of both the Financial Capability Strategy for the UK and the 2018/19 MAS Business Plan, under which this research was commissioned.

The financial education that children receive from their parents at home is crucial in shaping their future understanding of money. Only 40% of children ages 7-17 said they had learned about managing money at school or college³. A large number (90%) of children and young people said they’d go to their parents if they wanted advice about money. Despite this, only 60% of parents claim to feel confident talking to their children about money. There is a clear need to understand how to help parents help their children.

MAS’s previous research ⁴ has shown that parental actions and characteristics have a greater impact on a child’s financial capability than explicitly receiving a financial education in school. Children who are more financially capable tend to have parents who role model financially capable behaviours at home, through explicit teaching (e.g. discussing where household income comes from, showing children how to check bank balance, setting
rules around money, discussing budgeting), through demonstrating behaviours (e.g. parent saves often) and through fostering their child’s connection with money through giving money to their child regularly and giving their child responsibility for spending and saving decisions.

Children who live in homes with adults who have lower financial capability, (or are ‘struggling’, ‘squeezed’⁵, or over-indebted), can have more likelihood of lower financial capability themselves⁶. This report aims to show positive examples and teachings from parents within households mostly recruited with an emphasis on MAS’‘struggling’ and ‘squeezed’ segments, around areas of financial capability

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1. The Single Financial Guidance Body (SFGB), created by the Financial Guidance and Claims Act 2018, now brings together the services of the Money Advice Service, The Pensions Advisory Service, and Pension Wise, under one body. The SFGB is a non-departmental public body, accountable to the Department for Work and Pensions, with a goal to help people make the most of their money and pensions. Prior to the creation of the SFGB, the Money Advice Service undertook a range of activity to promote the financial capability of children and young people, including developing the evidence base and funding and testing approaches to delivery. This research was commissioned as part of this work in 2018/19.
2. Children and Young People and Financial Capability: Needs Analysis (2018). Ann Griffiths and Shadi Ghezelayagh
3. Children and Young People and Financial Capability: Needs Analysis (2018). Ann Griffiths and Shadi Ghezelayagh.
4. Measuring Financial Capability in Children and Young People: What drives financial behaviour? (2018) Tom Clarke and Shadi Ghezelayagh.
5. ‘Struggling’ – A segment who struggle to keep up with bills and payments and to build any form of savings buffer. They are the least financially resilient and the most likely to be over-indebted. ‘Squeezed’ – A segment with significant financial commitments but relatively little provision for coping with income shocks. See ‘Market Segmentation, An Overview’ MAS (2016).
6. Children and Young People Financial Capability Deep Dive: Parenting MAS (2018). Dr Gavan Conlon, Viktoriya Peycheva and Wouter Landzaat.