The debate around providing children with financial education has been rumbling on for a very long time.
After all, countless studies have shown that many adults simply aren’t comfortable managing their money, or even understand what basic financial terms, from mortgages to interest rates, actually mean.
Why? Because they were never taught any of this when they were younger.
How then can they make sound and informed financial decisions and ensure their money is working hard for them?
Of course, the debate then turns to how early we should be teaching kids about managing money.
Interestingly, one study suggests we should be starting earlier than you might think – at about the age of seven.
Research by the University of Cambridge, published by the Money Advice Service (MAS), looked into how children learn about money and discovered that financial habits are often formed very early on in life.
Guy Shone, research director at the MAS, said: “The window is zero to seven. It’s very hard to reverse those habits later in life.”
So why is this such a good time to instill good habits into your child?
Well, your kids are completely dependent on you at this point in their life, and will instinctively turn to you for guidance, information and answers.
That puts you in a strong position to create a positive mindset on day one, rather than try to change it further down the line.
As Mr Shone says: “There’s a huge effect we have. We underestimate how powerful we are as parents.”
So how do you get young children familiar with financial basics?
Well, the answer lies in getting them involved in many aspects of your day-to-day life.
For instance, if you go shopping, take a list with you, so they understand from the beginning that you’re thinking ahead about what to buy and planning what you do with it, rather than purchasing impulsively.
You could even get them involved in putting the list together, and discuss which products offer the best value for money, so they get familiar with concepts such as weighing up multi-buys and bulk purchases against only buying what you actually need.
Actively encouraging children to save, perhaps by giving them a piggy bank and requiring them to put aside a little of their pocket money every month, could also be worthwhile.
Interestingly, the Cambridge research found that young children often enjoy emulating the actions of adults, so instilling a savings habit early on could stand them in good stead for the future.
As financial planners, we often discuss the notion of financial goals and targets with our clients.
You could do the same with your kids and help them work towards a particular goal. Perhaps they want to buy a particular toy or game, in which case you could create a chart that tracks their progress as they save the money they need.
Not only does this teach them about budgeting and having clear goals in mind, it might also dissuade them from spending money elsewhere on a whim, as they’ll be focused on a much larger, more meaningful objective.
Children of a young age are hugely pliant and receptive to learning, perhaps more than at any other time in their lives.
So this might be a precious window where the messages you want to put out really sink in and make a difference to them in the long-term.
Of course, you can never be 100 per cent sure that they’ll act on what they’ve learned from you – ultimately, that’s up to them when they grow up.
But as Mr Shone stresses, talking to your children about what you’re doing and how you make decisions “can be really powerful”, so don’t miss this valuable opportunity to equip them with precious life skills and knowledge.
