Financially fit futures: Future-proof your child’s success with financial literacy education

Is financial literacy the missing piece in your child’s education? Discover why financial literacy matters and why teaching financial literacy is essential for your child’s long-term success.

Money doesn’t grow on trees – we all know that, and hopefully our children do too! This statement is a very simple form of financial education, i.e. teaching our children about money. 

Financial literacy is becoming an increasingly hot topic in education as evidence emerges on its effectiveness when taught from an early age. Our post will explore what financial literacy involves, how it benefits your child, and creative ways you can introduce this learning at home.

What is financial literacy, and why should parents care?

To be financially literate is to possess the skills and knowledge that enable us to make informed decisions with our money. This encompasses everything from day-to-day budgeting to major decisions, such as mortgages. Benefits that children enjoy from a proficient financial education include:

• Improved critical thinking¹

• More proficient in planning and setting goals¹

• Better decision-making skills¹

• Encourages independence ²

• More likely to manage debt effectively in adulthood³

• Boosts academic performance in maths-related subjects⁴

¹Mo, J. (2020), “PISA 2018 results: Are students smart about money?”, PISA in Focus, No. 106, OECD Publishing, Paris²The Money Advice Service (UK). (2013). Habit Formation and Learning in Young Children.

³Lin, J. T., Bumcrot, C., Ulicny, T., Mottola, G., Walsh, G., Ganem, R., ... & Lusardi, A. (2019). The state of US financial capability: The 2018 national financial capability study. FINRA Investor Education Foundation.

⁴Mandell, L., & Klein, L. S. (2009). The Impact of Financial Literacy Education on Subsequent Financial Behavior.

Despite the benefits, financial education is only included in the secondary school curriculum, and only 38% of students between the ages of 7 and 17 receive any meaningful financial literacy education. This gap in our young people’s education can have far-reaching consequences and is something that we as parents should address. 

Costs of avoiding financial conversations

A lack of financial literacy and avoiding financial conversations can have real-world consequences and put individuals at a financial disadvantage. Research has found that people who were not financially literate are more likely to:

• Have outgoings greater than their income¹

• Engage in expensive credit card behaviours (e.g. only paying minimum balances, missing payments)¹

• Have lower household wealth²

• Be more financially stressed²

• Expect a lower retirement income²

.¹ Lin, J. T., Bumcrot, C., Ulicny, T., Mottola, G., Walsh, G., Ganem, R., ... & Lusardi, A. (2019). The state of US financial capability: The 2018 national financial capability study. FINRA Investor Education Foundation.² Prast, H. M., & van Soest, A. (2016). Financial literacy and preparation for retirement. Intereconomics, 51(3), 113-118

Currently, we are seeing how a lack of understanding around mortgages is affecting some homeowners. During 2020, many were naive to the fact that mortgage rates were historically low and did not understand the impact a rise of just a few percentage points would have on monthly repayments –  collectively an extra £176.6 million in 2025 alone. A lack of financial understanding has left many of these homeowners blindsided by the additional cost and has placed them under financial strain.

Having conversations around finances now and teaching financial literacy will help your child prepare for their financial future and avoid potentially expensive mistakes. 

Practical ways to introduce financial literacy at home

1. Allowance systemGive your child a regular allowance and encourage them to split this between spending money and savings. You can use jars at home or use an online tool like GoHenry or Monzo. You can also have them earn their allowance by completing tasks, teaching the value of money in that it is earned, not just given.

2. Create real-life budgeting opportunitiesLet your child be in charge of the family gifts at Christmas and give them an overall budget with a list of recipients. This will encourage their planning and research skills, the ability to compare prices, and allow them to reflect on value for money.

3. Involve your child in family financial conversationsShow your child your household budget and how outgoings are split between utilities, mortgage payments, any subscriptions, and so on.

4. Teach compound interestIf your child is regularly saving their allowance, offer to “match” deposits or pay “interest” on any money saved. This demonstrates how money can grow over time when saved.

5. MonopolyAfter a game of Monopoly, hold a debrief and discuss what decisions worked and which ones did not. 

How private tuition can reinforce financial literacy skills

There is a wealth of evidence to show that early and intentional financial education is key to our children’s future success. It is recommended that, to become financially literate, children need 30 hours of financial education. Tutoring future-ready skills for children like financial literacy is crucial, and online private tuition is a way to fill the current gap in the curriculum.

Engaging a tutor for financial literacy support beyond the classroom is the best first step in raising financially confident children. Many of our Birchwood Tutors are individuals who are currently studying finance or who hold real-life financial roles. Their real-life skills allow them to offer world class tuition (from anywhere), ensuring your child can achieve their academic goals and is equipped with the skills essential for future endeavours

My final thoughts

Financial literacy is no longer a ‘nice-to-have’ – it is an essential skill that empowers our children to make smart decisions in their futures. While there is growing recognition that a gap exists in the National Curriculum within schools, there are ways parents can use simple opportunities to fill this gap. Having these conversations now and using the tips above to develop your child’s financial literacy gives them the tools they need to navigate their financial future.