Across the UK, many young people are growing up without the financial knowledge they need to feel confident managing money. This highlights why it is so important for children to start learning about finances from a young age.
Research from Pay.uk found that around three-quarters of UK adults consider themselves financially literate. However, 29% do not understand how a savings account works.
The same research also showed that even among people who describe themselves as financially knowledgeable, 19% run out of money every month, while 27% run out of money every two months.
One point most adults appear to agree on is that personal finance should be taught in schools. In fact, 86% believe financial education should be included in the national curriculum.
Other research has also shown worrying gaps among younger adults. For example, 56% of young adults do not understand how ISAs work, while only 9% of 18 to 24-year-olds were able to pass financial literacy tests.
These figures suggest that learning about money early in life can give young people a major advantage. While many people support the idea of financial education in schools, parents and guardians can also play a vital role by teaching children the basics of saving, budgeting, and responsible spending at home.
Why Financial Literacy Is Important
At a time when the cost of living remains a major concern, helping children understand how to use financial products and services can have a lasting impact on their future.
The OECD/INFE’s international research into financial literacy suggests that people with stronger financial knowledge tend to experience better financial well-being, especially when dealing with unexpected financial challenges.
For parents, teaching children about money can help build their confidence as they move towards adulthood. It can prepare them for real-world responsibilities such as paying bills, managing student debt, budgeting for essentials, and making informed financial decisions.
Early financial education can also help young people avoid common debt problems later in life. By understanding how high-interest loans, credit cards, and borrowing costs work, children are more likely to recognise the risks before making decisions that could affect them for years.
Encouraging Positive Money Habits
Another key reason to teach children about money from an early age is that it helps them build healthy financial habits that can last into adulthood.
If children learn to save before they start earning a regular income, saving is more likely to become second nature when they begin working. These early lessons can shape how they think about money, spending, and long-term planning.
Financial education can also encourage responsibility. Children who understand the value of money are more likely to appreciate the importance of living within their means and making thoughtful choices.
This understanding can help them distinguish between wants and needs. As a result, they may become more disciplined with spending and less likely to overspend on non-essential purchases when they are older.
How Parents Can Improve Financial Literacy
Children often learn best through practical, real-life experiences. One simple way to introduce money management is by teaching them how to save their pocket money.
Pocket money can give children an early understanding of earning, saving, and spending. It shows them that money is limited and that they can make choices about how to use it.
Parents can also support this learning by giving children a piggy bank or opening a Junior ISA. These tools can help introduce ideas such as saving towards a goal, putting money aside for the future, or even investing in stocks and shares.
Junior ISAs can be particularly useful because they automatically become adult ISAs when the child turns 18. This allows young people to see how savings or investments can grow over time and how long-term planning can benefit them directly.
However, it is worth remembering that money held in a Junior ISA cannot usually be accessed until the child turns 18. For that reason, parents should avoid putting money away for the long term if doing so could create short-term financial pressure.
Another useful approach is to encourage children to save for something they want, such as a toy, game, or activity. This teaches delayed gratification and helps them understand that waiting and planning can be more rewarding than spending immediately.
Giving children responsibility for small amounts of money, whether through pocket money or payments for household chores, can also help them practise budgeting. These early experiences can improve their decision-making long before they have to manage a monthly salary.
Helping Children Prepare for Adult Life
Personal finance deserves a place in the national curriculum because it can teach children practical skills that will benefit them throughout life. However, parents and guardians do not have to wait for schools to provide those lessons.
By introducing basic concepts such as saving, budgeting, spending carefully, and investing, parents can help children feel more prepared for adult responsibilities. These lessons can make the world of work, bills, borrowing, and financial services feel less intimidating.
Whether you choose to open a Junior ISA, use a piggy bank, or simply talk openly about everyday money decisions, teaching children about finance now can make a meaningful difference to how they manage money in the future.
