Financial literacy – it’s never too early to start

By Sara Neidle

Put your hand up, if you have received a home contents renewal, a pensions statement or bank statement, and you don’t understand what it means. Well if that’s you, then I can tell, you are not alone. 

As a mother of two, I find myself questioning when I should start to introduce financial literacy into the home. My simple answer is - as early as possible. 

The current economic environment has demonstrated the importance of financial education; the question of what practical actions we can take to help our children become financially competent has never been so important. We must allow the younger generation to be empowered, to take ownership of their finances by having basic financial understanding and by building good savings habits.

There is plenty of research that shows that by the time we reach adulthood, many of us will struggle with money – uncontrolled debt, lack of savings and financial stress. A survey commissioned by Israel-based Bank Leumi's challenger brand Pepper showed nine out of ten consumers in the UK feel that they are undereducated in terms of personal finance. If we start young, then we can only hope that in the future our children will have a good relationship with their finances. 

During lockdown I bought my daughter a little paint me clay piggybank. One of our many activities was painting the piggybank. Now I watch her enjoy, putting coins each week into the piggybank. There are lots of other fun ways you can engage little toddlers when teaching them about finances. 

The FT’s announcement last week about a new initiative dedicated to promoting and expanding financial literacy and inclusion around the world was heart-warming. It is clearly a step in the right direction, and I look forward to reading about the new educational campaign in the new year.

Financial literacy is all around us. What do negative interest rates mean? How can I get on the property ladder? Should I invest in a cash or stocks and shares ISA? What is an ISA? Should I have critical health insurance or income protection? And the list goes on…. It can be unbelievably overwhelming at times especially if you don’t understand what it all means. Now, more so than ever is the time for people to take control by having a better understanding of their finances and using the resources at their fingertips. 

It’s great to see how the financial services industry and especially fintech’s are starting to pave the way to make financial services more transparent and help consumers understand their options. For example, personal finance management (PFM) platforms such as Cleo and Plum aim to help consumers keep track of their everyday spending and provide them with suggestions on where they can save money. 

It all boils down to communication. Yes, there’s a gap in people’s financial understanding but how can we help narrow that gap? It’s through engaging and encouraging people to get involved in their finances early on. The more interested they become, the greater their understanding becomes and they will appreciate the importance of financial literacy more. So let’s make financial literacy fun and engaging. By doing so, people will make better financial decisions.

It’s never too early to start!