Teaching healthy financial habits today for a more prosperous tomorrow

Teaching healthy financial habits today for a more prosperous tomorrow

By Tom Eyre, Co-Founder and Co-CEO, Loqbox

Consider all the things that you were taught in school that never came in handy in adulthood. Strange then that so many of us were never taught the basics of financial management when it’s a skill we need every day.

Nevertheless, a Financial Times survey in 2021 found that 90% of people in England felt they’d learnt “nothing at all” or “not very much” about finance at school. It’s an educational gap that persists today.

As soon as a child reaches 18, they are eligible for all sorts of financial products like credit cards, student loans and overdrafts. While these services can be extremely useful, understanding how to use them is key to fostering a positive relationship with money.

That’s why it’s so important for parents to instil good financial habits from an early age. Like when learning a language, teaching financial skills is a case of ‘the sooner, the better’. Children soak up information like sponges, and the earlier we begin nurturing good habits, the more empowered and confident young people will be in managing their finances.

Paving the way for financial wellbeing

For kids, the lessons that stick, usually involve an element of fun. By incorporating practical examples that align with typical childhood activities involving money, we can make the learning experience enjoyable and positively shape their financial understanding.

Here are a few ideas for incorporating financial lessons into everyday life:

• Get the kids involved in real-life financial situations. Look for opportunities to engage them with financial management, such as handling bills at a restaurant or during your weekly grocery shopping.
• Give children a view of the transactions you’re making to help them build familiarity with the process. Show them where the money you use comes from, how your card links to your bank account, and let them see how much things cost. All this helps them understand financial accountability.
• Let them use their own money. Give your children pocket money and encourage them to set a savings goal for something they want – like a toy, clothing or console game.
• Create a simple budget with them so they can see how long it will take to get enough money together. This way they can see how savings grow, while safely discovering the fundamentals of money handling at home.

These experiences will help create a happier, healthier relationship with money that people can carry with them throughout their lives.

The right tools for the job

However you choose to teach your children about handling money, the most important takeaways for them should be:

• How important it is not to spend beyond their means
• Why making timely repayments is a good thing
• How financial wellbeing can affect the body and mind too

Thanks to a new generation of prepaid cards for children, which can be protected with parental controls and in-app learning, it’s easier than ever to help kids build their financial knowledge.

These tools are great for introducing children to using payment cards responsibly, enabling them to view how much money they have available and where they’ve spent it. Prepaid cards give young people a degree of financial independence while keeping them in a safe space to explore paying for things on a card before they get their hands on a real credit card (and the line of credit attached to it). They also offer parents and caregivers an opportunity to explain how bank statements, overdrafts, credit scores and reports, and high-interest debt work.

It’s often the case that young people have no idea what credit is until it’s being offered to them. So, it’s a good idea in general to make children familiar with credit scores before they turn 18 – that way they have a good understanding of what impact their decisions will have on their financial future.

Getting it right early can save them thousands of pounds on credit cards, student loans, mortgages and other products when the time comes for them to apply – not to mention a whole lot of time. If you are happy for your young dependant to see your credit history, why not get them interested in how it works by showing them your credit score?

Why it matters

When we feel like we have enough money to cover the basics – and enough to cover emergencies and the things we enjoy – money can help us to feel safe and secure. On the other hand, when money is tight or if we’re having a tough time financially, it can sometimes feel like money is affecting our overall wellbeing. Money can make us feel worried, uncomfortable, anxious, or even guilty.

Maintaining a good understanding of financial products can contribute to a healthy credit score, access to more affordable financial services and products, and avoids higher-cost alternatives.

At Loqbox, we understand that when people are empowered with financial literacy, they have the knowledge, tools, and healthy money habits to move forward in their financial journeys with confidence. Providing children with a solid foundation of financial education is one of the best ways we can prepare them for the future and protect their long-term wellbeing.