Would you talk to your nine-year-old child or grandchild about debt? What about bailiffs or mortgages? Most of us would shy away from talking about money problems with such young children, but financial education charity DebtAware is planning to change that.
Today I visited a Year 5 class at St Mary’s Catholic Primary School in Chorley, Lancashire, to see the charity’s work first hand.
There is silence in the sunny classroom, decorated with colorful posters about the importance of reading. At the table in front of me, students are studying a worksheet about the difference between good debt and bad debt.
In today’s economic climate, the need for financial literacy couldn’t be more urgent.
Debt was the morning’s topic of conversation and one student, Isabelle, ten, eagerly tells me that she is saving money to buy her first house. “When I see something I want, I look at how much money I have and remind myself that I need other things,” she says, wanting to show that she has understood the lesson.
Focused: Adele Cooke accompanies fifth graders in her class and learns about debt at St. Mary’s in Chorley
Average debt in the UK has risen by 19 per cent since 2022, according to personal insolvency provider Creditfix.
According to the charity Joseph Rowntree Foundation, almost six million low-income families have unsecured debt, amounting to around £14.2 billion as of May 2023.
Almost six in ten respondents who say they use credit to pay bills have savings of less than £200. Since entering schools in January 2013, DebtAware has taught more than 80,000 children money management skills, including budgeting and borrowing. This year there will be classes in around 100 schools in the northeast.
The program is run by the Debt Advice Foundation, a national charity that provides free and confidential help to people worried about credit, borrowing and debt.
Around three-quarters of 18- to 24-year-olds say they wish they had been taught more about money at school, according to research from digital payments provider Pay.UK published last month.
Back in the classroom, today’s lesson will be led by DebtAware volunteer Brian Souter.
Brian, a vivacious retired teacher with more than 50 years of experience, captures students’ attention from the moment he enters the classroom.
“The Debt Advice Foundation helps people who have fallen into debt, but our job is prevention rather than cure,” he says. “Our aim is to provide children with the knowledge, understanding and skills so that they can develop a good attitude towards money and manage it sensibly and safely.” At this age children are learning the right skills, but in secondary school it can be more difficult to leave an impression.”
The goal of today’s session is to teach a class of fifth graders the difference between wants and needs. In the coming months, this course will also learn about budgeting, payments, saving, and borrowing. “What is debt?” Mr. Souter asks the class in a singing voice.
“Debt means borrowing money and having to pay it back,” the children sing in unison as they read from a worksheet.
The lesson covers money issues in detail and it is fascinating to watch the class talk about the importance of good debt. Good debt is money borrowed for a reason that provides lasting benefit and where repaying the loan is within your means.
Another worksheet gives children definitions of financial terms, including mortgages, credit cards and bailiffs.
Under the national curriculum, primary schools are not required to teach their pupils about money.
Instead, schools can choose to work with the charity PSHE Association to develop their own curriculum, which can include lessons on saving and spending and getting value for money.
Only when students reach secondary school age does the government recommend educating children about debt.
But all the children I talk to are already aware of the dangers that come with a lack of money. Among them is Declan, ten, who proudly shows me his black Fitbit smartwatch, which he uses to track his spending.
“If we learn something about money now, we won’t make mistakes when we get older,” he says confidently. “I’m saving my money now so I can have more when I grow up.”
Fifth grade teacher Lisa Hesketh believes it is important to give children the knowledge that they are capable of managing their own finances.
“In each module, debt is discussed again to make children aware that there are good and bad debts,” she says.
“These children need to have money knowledge and understanding from a young age in order to be confident later in life. They can then ask questions in everyday life and have conversations with the family at home.”
For Isabelle, these lessons will help bring her one step closer to her dream of one day owning her own home.
“My family and I rented for three years and lived in three different houses. Now we’re getting our own house,” she tells me proudly.
“I have a bank account that I put my money in because I want to make sure I invest now so that when I’m older I have enough money to buy a real house.”
Maybe we could all use a lesson or two.
…and this is how you can teach your own children
You can start talking to kids about money as early as age three or four – as soon as they start asking questions, suggests Money Helper, a government-backed money advice website.
At this age, many children can understand that items cost different amounts of money. So try talking to your child or grandchild about how much things cost the next time you go shopping. If you’re shopping together, you can ask her to hand over the cash to practice counting coins and bills.
At the age of five or six, children begin to understand the concept of saving. So encourage them to set aside some of their pocket money each week for a toy they want.
By the time a child is seven or eight years old, he or she can tell the difference between wants and needs. Ask them to use a Venn diagram to categorize various items, such as a laptop, a cell phone, or a pair of sneakers, based on whether they are a want or a want, suggests DebtAware’s Brian Souter. You could also ask them to identify good and bad reasons for borrowing.
If they are thinking about spending their allowance, you can also ask them to write a shopping list of what they will buy and how much it will cost.
When your child starts high school, you can talk to them about responsible money management. Between the ages of nine and twelve, children typically begin to understand how to budget and check a receipt or bank statement.
At this age, children are ready to learn about debt. So discuss why you pay interest when you borrow and ask them what they would do if they couldn’t repay the debt.
A good way to build on existing knowledge is to offer the opportunity to earn extra money by completing additional tasks around the house.
You could also set them a savings goal for things they might want.
For more tips and tricks visit Moneyhelper.org.uk/en/family-and-care/talk-money.
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