The things we DON’T teach about money in school
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It’s long been a bugbear of mine that not one of my 3 children has learnt very much about money management at all, in school. I say ‘not much’, because one of mine took business studies as an option and did learn a little about finance, although from a business point of view rather than a personal finance point of view.
Since 2014, financial literacy has been on the school curriculum, although faith schools, private schools and academies are not required to teach it. Even in state schools that are required, my experience of money management being taught is that it’s seriously inadequate.
A recent OECD report found that the UK is below average when it comes to teaching the subject, if the schools ends up covering it at all. But why?
Schools have not kept up with modern life
It’s one theory that the reason money management is not taught in schools very much is that it’s still expected that children will go onto either a levels, university and a career, or apprenticeship training and a career. You work, you save, you budget, you buy a house, and you stay there. But times have changed.
The days of kids starting to earn money as soon as they leave school, and staying in the same job are long gone. Todays school leavers are expected to have up to 4 different ‘careers’ in their working life time, with nearly half expected to work for themselves rather than take traditional employment with an employer.
Of course that brings HUGE financial implications, self assessment tax for one, and with no one to teach them about it, it’s hardly a big surprise that so many get into financial mess. It’s estimated that over half of todays school leavers do not know what the basic rate of tax is. And how would they if no one’s telling them about it.
Are teachers even qualified to teach money in school?
Money management is not part of a teacher training course, despite 14-16 year olds being required to learn about pensions, mortgages, savings and investments. Many schools wind up not covering these subjects at all, simply because they do not have a qualified teacher in school who’s able to teach it. And if you’re a teacher who’s judged purely on the grades your student’s get at exam time, who’d blame you for focusing on the traditional subjects instead.
Each persons experience of personal finance is unique to them and their specific set of circumstances. If the teachers personal finances are in a mess, they’re highly unlikely to be able to teach our children the best way to deal with personal finance. And would you even want them to, if they were unqualified or had little experience to do so? It’s a double edged sword for me, I do want the children to be taught about money in school, and know first hand how important it is to be educated about it, but I don’t want someone with little, or worse, detrimental knowledge teaching them about it.
Do we know enough as parents to be able to teach our children about money?
As a parent, I like to think that I teach my children good habits. Not just about money, but in life in general. However, it took me 15 years, a HUGE pile of debt, a mortgage we couldn’t afford and many many sleepless nights to be able to feel confident that I NOW know what I’m doing. So I worry that I didn’t teach the children when they were young enough, or I’ve already disadvantaged them by showing them how NOT to do it before showing them how TO do it, well.
Some parents just do it right from the off. They’re all set financially and good to go. That was not us :) And I don’t believe it’s the majority of parents either. With total household debt increasing year on year, we’re clearly not the only ones who struggled with our own finances, let alone been in a position to teach the kids the best way to handle theirs.
So what should our kids be learning about money in school? (or anywhere!)
Everyone wants to be rich, no one wants to be poor. And definitely not poor AND in debt.Tony Robbins, author of best selling book Money: Master the Game has one thing above all else he believes ALL kids should be taught, in school, at home, or wherever.
The power of compounding
Grasping this concept honestly changed my life. I still have no idea how this passed me by for so long. It’s enabled us to build a savings account, and saved us from a very lean retirement (not that we’re there for quite a while yet!).
“You’ll never earn your way to freedom,” Robbins tells us “But you can compound your way there.”Compound Interest is when the interest earned on your investments earns interest itself— it’s what causes wealth to rapidly snowball.
You don’t need to be rich to invest and take advantage of the power of compound interest, Robbins emphasizes. You just have to be smart about it, and start as early as possible — WHEN you start to save outweighs how much you save.
Take the example of Theodore Johnson, who never made more than $14,000 a year working for UPS, yet retired with $70 million, all due to wise investing. “Even though he made little money, he took 20% of his money and it went straight into an investment account,” Robbins writes in “MONEY: Master The Game.” “Over more than five decades, that compounded to make him $70 million.”
Just as a small salary can generate millions, a salary with a bunch of zeros tacked on the end doesn’t necessarily equate to wealth.
“How many times have you seen a person who won the lottery lose it all and become broke five or six years later?” Robbins writes.
If you want to teach your kids how to grow rich, Robbins says, teach them how to manage their money, starting with the concept of compound interest, along with how to make money.
How credit card interest is calculated
Kids are clever. They’re capable of getting this way more than adults, simply because as adults we have a tendency to bury our heads on the sand. We’d rather not know and declare that it’s just ‘far too complicated’. Once you learn how credit card interest REALLY works, it’s almost impossible to see how a credit card ever seemed like a good idea, and this is a GREAT lesson for kids.
They’re going to come up against credit cards as they grow, that’s for sure. But if they can have a total understanding of what they are, what they cost and the right way to use them, you might just save them a whole lot of stress.
This is our credit card interest calculator. Put in your balance, your interest rate and it’ll tell you how much money goes to the bank this month. That’s not a penny off your balance, that’s just to the bank. It’s a total eye opener.
Find out what the interest is on this
months minimum credit card repayment
The importance of an emergency fund
Having an emergency fund cannot be underestimated. As adults, it takes away the need to use a credit card when an emergency comes up. Getting your kids to start saving while they’re younger teaches them that they need to have some kind of a ‘back up plan’ and saving regularly is the best way to go about getting one together!
Starting saving before they really need to have it teaches kids not only about planning for the unexpected, but also gets them into good habits for saving throughout their life.
There are loads of ways to get kids excited about saving. Jam jars are the most basic but engaging way to get little ones saving. Just a few pence added each week lets them see their savings grow. Once they’ve saved up for something, a toy perhaps, they get to count out their money and see if they’ve got enough.
For bigger kids, bank accounts do the same thing with the added bonus of teaching them about banks. Kids can have banking apps just as adults can, and getting them into the habit of checking their account on a regular basis forms amazing habits for later in life. Banking in our world is a part of life, and quite an important part at that. Far better to learn the right way now, than the wrong way over a period of loooong years…..
Is all this enough?
Ultimately, kids learn about money from many different places. Like so many things, the people they’re around and the things they see influence them, without them even being aware of it, so how we are as parents plays a huge part in their future financial life habits.
I wasn’t in a position to teach mine when they were tiny, but I am making up for it now. I guess, as parents, we’re all just doing the best we can!
I’d love to hear about your experience teaching kids about money……let me know :)
These are some books I loved, if you’re looking to teach your lot some lessons on all things money!