The world of money has changed drastically. For us, as parents, we could tell how much pocket money we had left just by jangling our pocket. Nowadays, pocket money has been transformed by the growth of contactless payments and ecommerce, with digital transactions making it all too easy for months of careful saving to be blown with the touch of a screen or tap of a card.
With a study by the University of West London showing that one in five Londoners below the age of 45 struggle to pay debts as a result of ‘tap and go’ payments, it is no wonder that many parents have concerns over their children’s finances in a cashless world. Whilst contactless payments have undoubtedly made spending more convenient for many, young people are becoming increasingly aware of the potential risks posed by the ease of digital transactions. As a result, over 5% of young people are switching back to cash to better control their spending.
Statistics like these shouldn’t scare children away from contactless payments entirely, but they should act as a wake-up call to ensure we are instilling in our children a firm understanding of the value of money and an appreciation that every tap adds up. Digital money is here to stay, and it is vital that children are integrated into this cashless society.
Lessons in financial literacy
Schools have played an important role in introducing children to the uses and functions of money since the inclusion of financial literacy on the national curriculum in 2014, with pupils in Key Stage 3 (ages 11-14) being taught about managing risk and the importance of budgeting, and children in Key Stage 4 (ages 15-16) learning about credit and debit, income and expenditure, savings and pensions. Exposing young people to the practical applications of financial literacy skills is essential if they are to become financially competent and confident adults.
Though effective in theory, the limited time, resources and staff available to teach even the syllabuses’ core subjects, often results in financial literacy classes being squeezed out of the day. Lesson content is also a cause for concern; the emphasis placed on cash and coins neglecting the fact that digital transactions dominate the world outside the school gates.
With financial literacy lessons taking place inconsistently, and placing an emphasis on the physical forms of money, there is a risk that children won’t leave school with the certified grasp of digital money required in today’s world of consumer credit and contactless payments.
Outside of the classroom
Whilst financial lessons at school are invaluable, seemingly unexciting topics like budgeting, saving and responsible spending are best taught through hands-on experiences at home. Exposing your child to the realities of their spending in a controlled, safe environment creates an opportunity for them to comprehend the value of their money, cultivating their financial awareness and ability to manage their money independently.
Does your child know the average cost of the weekly family shop, or how much is spent on their school supplies? Encouraging them to get stuck in with the family’s finances exposes them to the daily, practical uses of money – consider setting your child a task to help with the next supermarket trip, challenging them to buy items on the shopping list within a set budget, or to work out your monthly spend from old receipts, so they can independently assess the purchases that cost the most.
Of course, managing their own money is key in a child’s financial education. Whether it’s saving up to buy the latest video game, or the satisfaction of building up a nest egg, successfully and independently budgeting their pocket money can enable children to realise the benefits that come with financial planning. Letting children treat themselves once in a while, be it from their own savings or with a little parental help, will encourage them to develop positive financial behaviours and habits.
Money management is a vital life skill that can be introduced from an early age, whether in the classroom or at home. As parents, we can supplement existing financial literacy classes with hands-on lessons from home, and help shape our children into a financially competent and confident generation.