{"id":1142,"date":"2022-03-31T00:00:00","date_gmt":"2022-03-31T00:00:00","guid":{"rendered":"https:\/\/www.rbcwealthmanagement.com\/en-eu\/2022\/03\/31\/how-to-raise-financially-confident-children\/"},"modified":"2023-11-01T11:11:45","modified_gmt":"2023-11-01T15:11:45","slug":"how-to-raise-financially-confident-children","status":"publish","type":"post","link":"https:\/\/www.rbcwealthmanagement.com\/en-eu\/insights\/how-to-raise-financially-confident-children","title":{"rendered":"How to raise financially confident children"},"content":{"rendered":"

Money makes the world go round, but many young people are venturing out into that world with limited understanding of finances. Parents and guardians have a crucial role to play in raising financially confident children who can build their own financial security in adulthood.<\/p>\n

Wondering whether schools are responsible for teaching this? It’s true financial education is part of the national curriculum in the United Kingdom, but less than half of seven- to 17-year-olds say they have received lessons on money.1<\/sup><\/a><\/p>\n

If children and teens aren’t learning about money in school, they might not be receiving any financial education at all, or may be getting information (and misinformation) from other sources. If your children are online, the chances are they’re absorbing a lot of information from social media. Some of the influencers on these channels might not be influencing them in quite the way parents would like, especially when it comes to money. To raise financially confident children, parents and guardians need to take the lead.<\/p>\n

Easy credit can lead to long-term debt<\/h2>\n

What happens if children’s financial literacy is not addressed early? At 18, they may suddenly find themselves in an adult world of cheap borrowing, bombarded with offers for credit cards and loans, plus the option to buy-now-pay-later for everything they purchase online. These financial products look like an easy source of free money if you know nothing about compound interest or credit scores. But the mistakes young people make at this age could haunt them for years, damage their credit rating or push them into a debt spiral which is difficult to escape. Debt charity StepChange says that 13 percent of its new clients in 2020 were younger than 25.2<\/sup> <\/span>Research also has shown young people are more susceptible to scams, making solid financial education even more important.3<\/sup><\/p>\n

Good financial habits children build now could last them a lifetime. “I was given an early grounding from my dad that if you couldn’t afford things, you didn’t buy them,” says Annabel Bosman, head of relationship management at RBC Wealth Management in the British Isles. “But then at 18 or 19 I completely disregarded that advice and took on a whole load of cheap debt. I think that pressure is becoming more acute now with the rise of buy-now-pay-later as an easy option, almost a default, so we need to give kids that awareness that this is not free money. We’ve got to start having those conversations earlier rather than later.”<\/p>\n

Be selective with social content<\/h2>\n

Part of the conversation with older children should focus on how to tell the difference between reputable and untrustworthy sources of information online, especially on social channels. “This is an area where schools have been quite helpful,” says Bosman. “I have seen this to a degree with my own children – that schools have been quite good at explaining that not everything you see online is real. We need to continue that frank and honest conversation and apply it to the world of finance when kids are talking about expecting 25 percent returns over a year with no risk attached.”<\/p>\n

Sam Wilson-Hartles, associate director, sales and relationship management at RBC Wealth Management based in London<\/span>, notes that there is a lot of useful content on YouTube, TikTok and Twitter, which parents can use to help boost kids’ financial literacy, if they are able to sort the wheat from the chaff. “There are some relatable creators that use these platforms to create short-form videos with eye-catching graphics, and they are all about helping the next generation understand topics such as the power of compounding interest, or investing in the stock market or understanding debt,” he explains. “Those are useful and I will be encouraging my child to look at them. It’s the creators and shows promising elevated returns or saying ‘Buy this or that stock’ that I would approach with caution.’<\/p>\n

Confidence-building for girls<\/h2>\n

Do parents need to do things differently when it comes to girls’ financial education? For Bosman, this is a question bigger than finance. It’s about building confidence. “For me, there isn’t a knowledge gap as you look at male and female investors. There is a confidence gap and that’s where early education and encouraging girls as well as boys to think about it is really helpful,” she says.<\/p>\n

Whether you have boys or girls, you can begin to teach them about money in an age-appropriate way even before they start school. A preschooler is old enough to have a piggy bank and earn money by doing chores around the house and you can then talk to them about spending versus saving. For older kids, Bosman suggests using a prepaid debit card designed specifically for children. There are many brands on the market and they often feature a pocket-money app linked to a parent’s or guardian’s account – which helps kids learn about money safely.<\/p>\n

Take action<\/h2>\n

Here are some practical things you can do today to boost your kids’ financial education:<\/p>\n