Teaching Generation Z to Save – Ask The Experts
7 minute read
Rising property prices and the steady inflation of goods and services are some of the issues our children will face in the foreseeable future. It has become clear that the need to teach them about remaining in control of their money is more important than ever. So what approach should we take to help Generation Z look after their money and prevent them from entering into financial difficulties? We asked leading financial advisers about the methods we should use and the ways we can encourage the next generation to save, not spend.
Dr Richard McManus, Lecturer in Economics and Accountancy at Canterbury Christ Church University:
Finances are not especially complicated, neither is the maths behind them. The finance language (jargon) can be prohibitive, and some would argue that this is deliberate, to make things as confusing as possible. People should not grow up to be fearful of finances and understanding how to manage them, and therefore, being exposed to learning about how certain instruments work. The earlier the better from my perspective; to postpone just gives this very simple subject the aura and mystic or something more complex than it is.
Getting a mortgage does not seem like a complicated topic. A downpayment on a mortgage is required to reduce the risk for the lender; there is a risk to the lender due to randomness and also due to some lendees being less diligent than others. I think very young children can understand this, if it is taught in the correct manner.
Claire Walsh, Aspect 8:
It is never too early to teach children to save! I encourage clients to give children pocket money and as they get older making them responsible for more and more of their discretionary spending with the option of whether to spend it or save it and then the saved money could be put towards bigger purchases.
I know of 5 year olds who’ve chosen to bank half their pocket money to save towards a bigger toy. I also have a client who has set-up stocks & shares ISAs for his children (age 7 & 10) and he’s shown them the performance and explained to them a little of how investments work.
Children are eager to learn and they love working towards goals and being rewarded. With teenagers you can make them responsible for buying their own clothes and paying for hobbies – rather than parents having to constantly make decisions this is empowering them to decide whether they’d rather have the cool new trainers or go to the cinema with their friends. This is helping prepare them for adulthood.
Pauline Paquin, MoneyStepper.com:
I believe in responsibility from an early age. Being given an allowance is great to manage a budget, learn how to delay gratification and save for a bigger ticket item. I started working as a teen and it was a great lesson, as you learn how much work is involved in making and saving the money before you can spend it. JIT approaches can work but like any topic, money is something you want to bring up regularly, not just when you need to teach a lesson.
Financial education is a long process to allow money not to be taboo and understand all implications of earning, saving and investing. I think children can understand anything if taught properly. A father brought his whole paycheck in cash to show his kids where the money was going every month and why, in spite of having a good salary, there wasn’t a lot left for whims. Teaching kids about mortgages and the impact of early savings can be done simply by showing them what a small amount sums up to after a few years, thanks to compound interest.
Ryan Ramirez, Love Learning Tutors:
In my opinion, we should teach young people about money as soon as possible. It surprises me that it’s still not taught in schools when it plays such a major role in our lives and society.
Learning, in general, sinks in more effortlessly when we are younger (from 2-10 years old) due to the subconscious mind being more impressionable. When we want young people to understand the importance of managing finances (for example), in a way that it really sticks, we must first spark their curiosity and interest on the matter. When we do that, we induce the right mindset for deeper learning and understanding.
A mortgage means very little to children at such a young age. A phone, game console or pet however, could mean a lot more! Playing games such as Monopoly with them can help provide the basic understanding of buying property with money, which may come to use later on in their lives. Show them how correct money management will help them to acquire those things, and they will use that process to acquire anything they desire now and in the future, be it a mortgage, a car or even a holiday. If we adopt the correct philosophy about money and manage money well, everything else becomes easier. The problem we have is bad money management and bad habits due to the lack of financial education and practices we’re given in life. Learn the correct information, and you’ll find that if you change your habits, you’ll change your life.
Anisa Lewis, Parenting Success Yorkshire:
My feeling is that although the focus needs to now be on Generation Z and making them wise to money the work needs to start earlier than this. Money really means very little to children, youth, young adults as they are a generation who has not really physically handled it, the priority has been on automation and ease of use. However, until you feel, touch, give away, collect back and see the ‘piggy bank’ rising the numbers don’t really mean much, it is very much an abstract concept.
Schools as young as Primary Schools need to play an active role in the role money has for their students later in life. There are definite steps being taken in this area so not all doom and gloom.
Something I did with my own daughter when she was younger (5 or 6 years is when we started), is that she would received weekly pocket money and she got a pound for every year of her life and she was given the pound coins. She then had 3 jam jars (very sophisticated system!) where they were labelled: give, save, spend, her responsibility was to place her money across all three of the jars. A simple system but one of money management and that taught her in a supported way the value of money and if you spend on one thing then there is nothing left for the other item you may want.
The challenge I see is that in a technological minded society with the focus on ease and efficiency, how does this translate into the life of Generation Z? Until you experience the sensation and, dare I say it, stress of not being able to pay your bills, it is hard to explain it out.
Carl Shave, Director, Just Mortgage Brokers:
Introducing the concept of money management is probably something that can be introduced in a child’s very early education. Finding the balance of this education and when it is done however is a subject of ongoing debate. Bringing the fundamental basics of understanding “value” is brought into many toddlers lives through very basic gratification skills but, perhaps the understanding of actual monetary value is still a concept beyond their grasp until around the age of seven. A greater understanding of basic mathematics at this age now gives the concept of money better meaning and throughout their education money management and skills should be continued within the curriculum.
Having been educated of the concept of money and it’s value throughout a child’s schooling, by the time they are young adults from 16+ the need to take on a more practical element to how this translates into the real world is vital. Understanding debt and its role in society should now be focused on in much greater detail to ensure these young adults who are soon to enter the world of employment or further education have a grasp of what debt is, and how it can affect their financial position later in life.