“ Emotional intelligence begins to develop in the earliest years. All the small exchanges children have with their parents, teachers, and with each other carry emotional messages”- Daniel Goleman
Emotional intelligence and attitudes towards money are developed at a young age. In fact, research has shown that the behaviour we exhibit as adults are learnt from an early age as children observe the environments to which they are exposed. Parents and carers have the most crucial influence and impact on how kids deal with money when they are adults.
Organisations and educational establishments also have a vital role in helping to shape children’s financial outlook by raising awareness and providing financial education to young people such as children. Therefore, organisations sometimes collaborate to try and combat some of the challenges faced in the 21st century, such as financial exclusion.
According to research, it has been found that many of the attitudes toward money are formed by age seven, therefore talking to young children from a young age is crucial to building their financial resilience young as this can help them to develop positive behaviours that could impact them throughout their lifetime.
In addition, the Covid-19 pandemic showed just how important it is to be financially prepared for eventualities by having savings, as many people in the UK have little to no savings. According to the independent, approximately one in five (19%) adults have less than £100 of savings deposited in their accounts, based on building society findings. This shows an increasing gap in the UK’s financial wellbeing.
However, during the pandemic (20%), people were able to increase their monthly savings pot; this research was undertaken for the Yorkshire Building society, whose aim is to increase the number of people saving. The building society also found that 21% of people were not saving, compared to 12% in 2019 when a similar study was done.
In addition, one in seven (13%) have no savings they could rely on if the unforeseen happened, and more than a quarter (26%) have less than £500 in savings. The pandemic also meant that children had fallen behind in their education. Furthermore, educational establishments do not always have the resources to teach children financial education; therefore, allocating time after they finish school or on the weekends to educate children on managing finances is crucial. Studies have also shown a significant link between money and overall wellbeing, as those prone to debt struggle more with mental health. MyBnk has closely examined the association between money and young people’s mental health.
A study of 3,700 young participants aged 11-25 was conducted by Mybnk. The study revealed that females were less financially confident and had more financial-related worries impacting their mental health than male participants. However, this changes after an intervention occurs as the gap closes and females surpass the capabilities of males.
How to teach a child to be financially savvy?
Do quizzes and games around financial management
Create quizzes/games for your child, such as a Needs vs wants quiz or game where they have to say what they think is a want or need and why. And then, you can use these games to educate them by correcting their answers and explaining why something is right or wrong.
Give children an allowance
Introduce an allowance system where children save within a budget to manage their money in a way that makes it last until their next allowance. This will teach them the importance of budgeting so that they have enough until they make it until they receive their subsequent payment.
Use piggy banks
Go piggy banking shopping with your child, let them choose the piggy bank, and encourage them to use it to save towards their goal. You could also buy more than one piggy bank if your child has more than one goal they would like to save for though this is more cost-effective if you have one-two children and can give them an allowance which they can divide between more than one piggy bank
Get your children to save towards a goal
Saving towards a goal from a young age is essential as it can help instil the value of saving from childhood, and at the same time, children get to experience what it is like to enjoy the rewards of their saving. For more minor children, saving towards a short-term goal such as a toy is recommended.
Have Financial sessions with your child
Schedule some time once a week to teach your child about managing money and setting them a goal. The financial sessions can also be used to review their progress.
Offer saving incentives
To encourage saving, if your child has set a goal that would require you to put money on top, you can encourage them to save as much as they can by a specific date and then tell them that you will put the remaining amount on top if you can so that they can get the new console or football kit they have had their eyes on.