Financial education to be taught in schools from September 2014

Thursday, September 05, 2013

From September 2014, children will be taught the basics of budgeting and borrowing.  The move comes after two years of intensive campaigning by, amongst others, MPs and peers in the all-party parliamentary group on financial education for young people.  The cause has also had the backing of teachers, parents, young people and supporters from across the financial services industry.

It is widely thought that financial education is essential in equipping young people with the knowledge and skills they need to be able to manage their money well.  Financial education will be included in mathematics and citizenship lessons, making financial capability a statutory part of a child's education for the first time.

Children aged between 11 and 14 will be taught about the functions and uses of money, the importance of personal budgeting, money management and a range of financial products.  From 14 years onwards, they will learn about wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services.

But September 2014 is still a long way away, so you might want to start teaching children about the value of money and how to manage finances sooner.  Follow our guide on how to help children become more financially aware for the future.

3-12: Start them early

  • Talk to them about how much things cost when you're shopping pointing out the various prices of the same thing and compare the cost of different brands
  • Having pocket money is good for children giving them a sense of independence and a choice in how they spend their money.  You could encourage them to start a savings habit early by putting a small amount of their pocket money into a piggy bank or savings account each week or month.
  • You could set up a child savings plan for them which they will gain access to as an adult, such as a Child Tax Exempt Savings Plan.

13-18: The teenage years

  • At this age some youngsters may take a part-time job so they'll need to open a current account.  These accounts usually come with a cash card, allowing them to take money out of cash machines - but only if there's enough money in their account.  Debit cards are usually not issued to anyone under the age of 16 without the permission of a parent or guardian.
  • As children get older they will gain control of accounts opened in their name by parents or grandparents.  Although it might be tempting to keep the money in a current account, reinvesting a proportion into another savings account could be a possibility depending on markets at the time.
  • Once a child turns 16, they can open a Cash ISA and in the 2013/14 tax year they are able to save up to £5,640 a year without paying tax on the interest.  Other tax-efficient vehicles available after age 16 include the Foresters' Tax Exempt Savings Plan.

18-21: Financial independence

  • This is the age when many young people leave home for university or move out of home to start their first proper job.  With this new found independence comes a new financial responsibility, such as bills to pay, so it's important they know how to budget.
  • Keeping a money diary can be a good way of budgeting.  Working out how much money they have coming in, adding up how much the essentials cost each month, and calculating how much money will be left over for non-essentials. The ability to demonstrate responsible budgeting is crucial for later steps in life such as securing a first mortgage.
  • At this age, they are also likely to be offered a credit card or loan for the first time.  Whilst these might be useful, it's important they realise the risks involved - namely that they are likely to have to pay back more than they initially borrowed and, if they miss a payment, this will have a negative effect on their credit rating.

When your child reaches adulthood, from the age of 18, they can open a Stocks & Shares ISA, investing up to £15,000, in the current tax year (2014/2015), with any gains free of income and capital gains tax.  Although you/they should be aware that they may not get back what they pay into a Stocks & Shares ISA, although there could be the possibility of higher returns over a longer term period investing in this way.

Tax-free means free of tax in the investor's hands, however tax is automatically deducted from UK share dividends. Please be aware that tax rules might change and depend on individual circumstances.

 
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