Discussions between family members – big and small – on the thorny topic of finance will lead to better pecuniary knowledge among children, while encouraging parents to save more.

The simple act of discussing finance and savings with children has a much deeper – and unexpected – effect than you might think.

Research undertaken by the Money Advice Service in Wales found that, over the course of the year, children were more savvy about managing their money following discussion about financial decision-making with their parents.

However, the act of discussing finances also saw the parents improve their own situations – there was a 15 percentage-point decrease in the number of over-indebted parents a year after beginning the discussions.

The service launched a ‘talk, learn do’ (TLD) module for parents as a pilot in Wales as part of a parenting course during 2016. For those that undertook the module, there was a marked improvement compared to parents who didn’t take the module.

One couple described the service that the process had led to a ‘reality check’ on their own financial situation. There was also a 13 percentage-point increase in the number of parents who gave their children pocket money – effectively introducing financial responsibility.

“We were really pleased to see more parents giving children pocket money,” said Ann Griffiths, senior policy manager from the Money Advice Service.

“We know that it doesn’t matter how much they get – what matters is that children have some responsibility for making choices with money. Giving a little bit of pocket money, involving children in food shopping choices, discussing bills out in the open, and showing children money tasks like checking a bank balance – these are simple things parents can do that really make a difference.”

Sarah Porretta, the service’s UK financial capability director, said “the earlier the better” when introducing children to money.

She said: “In fact, you can teach children a lot through everyday activities. Get them to help you making shopping lists, or involve them in household budgeting – and don’t think you have to shelter them from conversations about money.”

CASE STUDY

Vey and Tom Straker

Source: Triodos Bank/Good Money Week (Vey and Tom Straker pictured)

The Strakers have invested in a renewable energy bond within a new Innovative Finance Isa provided by Triodos Bank.

They bought bonds issued by Mendip Renewables, a solar farm, and held within an Innovative Finance ISA offered by Triodos on their crowdfunding platform.

“We were looking to create a launch-pad fund for our two daughters when they are ready to set out on their own. We wanted it to be a positive investment, something that was sustainable and forward looking.”

Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance.

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Further reading on this topic:

The ‘Financial Power of Women Report’ – somewhat lacking?