Most children’s financial habits are formed by the age of seven, according to the UK government-backed Money Advice Service (MAS), as it urged parents not to “underestimate the effect their own good (and bad) money habits will have on their children”.
The organisation pointed to a Cambridge University study that suggested that most young children had grasped all the main aspects of how money works and formed “core behaviours which they will take into adulthood and which will affect financial decisions they make during the rest of their lives”.
Caroline Rookes, chief executive of the Money Advice Service, said: “This study really demonstrates the power of parental influences, and illustrates how much of what you learn and absorb when you are young, both consciously and subconsciously, affects the choices you make throughout the rest of your life.” The service has called for money education to be included in the primary school curriculum in England.
The MAS, which is funded by levies on financial companies, some of which is ultimately passed on to customers, said the study results showed most children of seven knew how to recognise the value of money and to count it out, understand that money can be exchanged for goods, as well as what it meant to earn money and have an income.
They could also plan ahead with money and delay a decision until later, and they understand that some choices are irreversible. But it was also suggested that children under eight years old had not developed an understanding of the difference between “luxuries” and “necessities”.
David Whitebread of Cambridge University, a co-author of the study, said: “The ‘habits of mind’ which influence the ways children approach complex problems and decisions, including financial ones, are largely determined in the first few years of life. Simply imparting information is now recognised as being ineffective in this area.
“By contrast, early experiences provided by parents, caregivers and teachers which support children in learning how to plan ahead, in being reflective in their thinking and in being able to regulate their emotions, can make a huge difference in promoting beneficial financial behaviour.”
Tracey Bleakley, chief executive of the Personal Finance Education Group, said: “This useful research underlines how crucial it is that financial education starts from a young age, which is why we need to see it taught in all primary schools as well as at secondary level. Parents have a key role to play in reinforcing this by talking to their children about money and helping to pass on good financial habits.