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From small acorns

09 May 2017

Teaching children financial responsibility can add up to major gains in the long run – but it needs to start early.

Even though personal financial management is as important as ever, all the evidence suggests that many youngsters are not at all good at it – and that their elders are no better at teaching them.

“People struggle with the simplest financial questions,” says Rob Gardner, co-founder of investment consultancy Redington and financial education charity RedStart, and author of children’s book Save Your Acorns. Worryingly, financial illiteracy is the norm across all age brackets. But in a society which is heavily geared towards consumption rather than thrift, the problems faced by young people are doubly acute: those in the 15 to 24 age bracket represent more than 20% of the over-indebted population. Their average debt-to-income ratio stands at nearly 70%.1

One reason for this lack of understanding is the absence of education. Three years ago, the government made financial education statutory at secondary school level; but the foundations for being wise with money are set much earlier than that.2

Several studies suggest that the bedrock of financial education doesn’t relate specifically to money at all. It is about learning to take responsibility for yourself and a wider sense that what you do today has ramifications for the future.3 It’s also about grasping the value of delaying gratification.

“This period is all about habit formation,” says Gardner. “By the age of seven, most people’s attitudes towards money are fixed for life.”

Children first learn that saving today – by making small sacrifices such as forgoing sweets – could add up to something more worthwhile tomorrow, such as being able to afford a new bike. As they get older, we hope they might gain an understanding of how savings earn interest; the bountiful rewards of compound returns; the tax bands on income; and, lastly, knowledge of financial products such as personal pensions or ISAs.

Yet we find that, even as young adults, many are at a loss to understand simple interest rates, let alone a pension or a Help to Buy ISA.

“It’s clear that kids’ attitudes towards money are shaped at a much younger age than we think, so we need to start the process of talking about money as early as possible,” says Sarah Willingham, an entrepreneur who appears on the BBC’s Dragons’ Den.

The failure to put the basics in place for children in primary schools has rebounded on government attempts to kick-start the process, according to the All-Party Parliamentary Group on Financial Education for Young People. It cites the opinion of Martin Lewis, founder of, that getting financial education onto the national secondary curriculum had proved “damaging because many people saw it as a job done”.

Given the lack of financial tuition in primary schools, it makes sense for parents and grandparents to step in. Young children are receptive to advice – they also appreciate it. Perhaps surprisingly, they are sometimes more receptive to their grandparents than they are to their parents.

Gardner sets out his tips. The first is to focus on building responsibility. This needs to happen between the ages of four and six, and simple stories can help. In his book, Save Your Acorns, characters include monkeys who eat all their bananas, bears who keep back some of their berries, and squirrels who save some acorns and then go on to plant them, thereby reaping the rewards later.

As children get older, Gardner recommends then explaining how the ‘miracle’ of compound returns (coupled with tax relief on pensions) can make for dramatic gains over time.

Another of his tricks is to frame explanations in terms of concrete and desirable purchases. No one likes to be told not to buy a coffee each day. So, instead, explain how much they would save between the ages of 18 and 40 if they didn’t indulge in such a regular treat.

The next 30 years will see the largest intergenerational transfer of wealth in history4, with trillions flowing to the current generation of children from parents and grandparents. Gardner’s two-year-old daughter will not find herself left out – she already has an ISA and a pension pot, thanks to her dad. As ever, the message is that it is vital to start early.


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