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It seems it’s never too early to start introducing children to the concept of money management, helping them develop good financial habits that will stand them in good stead for the rest of their lives.
Although learning about money is now part of the National Curriculum for secondary schools in England, it isn’t specifically included in junior school lessons. However, there are many ways of gently introducing younger children to the world of finance.
Research by Cambridge University for the Money Advice Service, shows that financial habits are formed by the age of seven. By this age, the report says, most children in the UK are capable of complex functions such as planning ahead, delaying a decision until later, and understanding that some choices are irreversible.
According to the Halifax’s annual pocket money survey, pocket money has hit a nine-year high. Their survey of children aged eight to 15 found that they now receive £6.55 a week on average. The survey also shows that parents start giving their children pocket money between ages six and seven, making this a good time to start teaching children about the value of money and the benefits of saving.
Lessons for later life
Some of the concepts that children will need to understand later in life include:
Learning to save
Junior Individual Savings Accounts (JISAs) are a good way for children to learn about the value of saving money for the future.
The advantage of a JISA is that they are tax free, and once the account has been opened by the parent or guardian, anyone can make contributions, including grandparents, friends and family. The savings limit for the current tax year is £4,080, rising to £4,128 for 2017-18.
Children gain control of their JISA at age 16, but the money cannot be withdrawn until the child is 18. At that point, the account is automatically rolled over into an adult ISA, a valuable facility for those who want to continue saving or investing tax-efficiently.
Knowing how credit cards and loans work
It can be an important life lesson for older children to learn how credit cards work, and how interest and charges are calculated, and how they can mount up if the balance isn’t cleared each month.
When it comes to borrowing money, they need to know that there are many different types of loan available and that it’s important to understand how to compare charges and interest rates.
It’s also worth explaining to teenagers the value of having a good credit score and how this can improve their financial chances when the time comes to enter into major financial transactions like taking out their first mortgage.
Beware of impulse purchases
The way we shop has been transformed by technology in recent years – more than half (52 per cent) of consumer purchases are now made without hard cash. With the rise of contactless payment cards, consumers are finding it increasingly easy to make more impulse purchases. Teaching children the art of budgeting and keeping track of their spending habits could be even more important in the years to come.
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