A Little Bit Richer

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Iona Bain: Hello, I'm Iona Bain, and a very warm welcome to A Little Bit Richer, the podcast talking all things personal finance, brought to you by Legal & General. So look, we all want to raise smart, confident children who are good with money, but where do you start, especially if you didn't have this information growing up? Well, research suggests that foundational money habits are often set by age seven, but for many, knowing how and what to teach children can be pretty daunting. 

So today, I'm joined by Leon Ward, CEO of Money Ready, a financial education charity dedicated to creating a financially- fluent population. The Money Ready team go into schools, colleges, and community groups to deliver hands- on training to children and young people. And Leon is here to show us that teaching kids about money doesn't have to be complicated, just age appropriate, engaging, and starting sooner than you might think because the money habits we build in childhood, well, they follow us all the way into adulthood. Leon, welcome to the podcast.

Leon Ward: Thanks for having me.

Iona Bain: So just to get us warmed up, can you explain in 30 seconds why teaching finance to children from a young age is so important?

Leon Ward: It's really important to teach kids about money because they interact with it from a very early age. And what we want to do is build good habits to create better consumers in the future, better savers, and an overall financially-savvy nation.

Iona Bain: Ooh, you did it in half the time. Excellent work. Now, can you talk to us a little bit about the kinds of things that we should be teaching children about money? And what age would you say these conversations need to start?

Leon Ward: You can start as early as possible. One of the things that we do at Money Ready with Reception-age children is share a story with them about a squirrel family who are saving acorns in the summer for when there's a rainy day. And that's just introducing a basic concept of saving. In terms of general advice, I would encourage parents to just start with what you know. So if you know about budgeting, start there. If you know about different types of banks, start there. And you know your kids better than anybody else. So start at the right time for them with the right concepts, but the key message is to just start.

Iona Bain: So there isn't necessarily a specific age that everyone should start that conversation at?

Leon Ward: No, it's not scientific. It's more of an art, really. So if your child is, like they often are, a complete sponge, then you can start earlier. And again, as I say, introducing concepts that you are really comfortable with and perhaps ones that they're experiencing in their household. So if, I don't know, planning the food shop is a big event in your household because you're mapping out your meals for the week to help you stick within a budget, then get your kids involved with that. Ask them what they want, ask them how much they think it costs, show them how much it costs. And then, you might want to take them around the shop with the actual guns so they can scan the items and, as I say, get involved as soon as possible.

Iona Bain: And in your work, are you quite surprised at how early children start to form some of their attitudes to money?

Leon Ward: Yes. A lot of the time we go in, there's already some attitudes towards money that people have. And lots of children, young people that we work with, especially in our most- deprived schools, they're extremely savvy around saving money and around making sure that they're critical consumers. So not buying necessarily the smartest phone because it has advanced capabilities, but buying a phone that does the basics that they need. It's quite interesting how, I think, as they then get older, that habit kind of changes because kids want the smartest, latest technology, and that's probably because the impact of what's going on in their peer lives. But generally speaking, kids are really hungry to learn about this stuff.

Iona Bain: And are there particular misconceptions that can take hold at an early age? We hear this phrase that children often think that money grows on trees, but do children actually believe that these days?

Leon Ward: I think they know money's come out of banks, but I don't think they know how it's earned. And I think that's because parents have never said it. Yes, they say, " We go to work," but we know that lots of adults in this country don't check their payslip. How powerful would it be if you sat with your teenager and showed them the payslip that you've earned? Show them how much money you've got coming in and money that's going out and what that money is going on.

So even you're talking about your National Insurance tax, pension contribution, student loan, whatever it is that you're paying off through the payslip because home is a really powerful place to do that learning and to tackle those misconceptions. But generally speaking, I think kids are pretty smart about this stuff. But yeah, they don't necessarily correlate like a new PlayStation might take a week to earn in terms of what someone's taking home at the end of the month.

Iona Bain: So they can find it quite hard to conceptualise how much they would need to work in order to pay for something that they want?

Leon Ward: Yes. And with older children, because of the influence of social media, they often think that everyone leaves school and earns a hundred grand when we know that isn't true and the average salary in this country is mid- 30s. So we're miles away in terms of those expectations. But again, it's because through the school curriculum and at home, people have not had those conversations with them. So why would you think any differently? If everything you're seeing is people consuming all of the time, you might reasonably assume actually that person's earning a lot more money than the average.

Iona Bain: I remember a few years ago as part of a financial education documentary that I presented, we went into a primary school and saw the children role- playing as consumers and shopkeepers. And they were pretending to go to a grocery store and pay for vegetables, which were plastic, with money that was also plastic. But what really struck me about that even then was that the children were being taught how to handle real money in a real- life environment. Do you think that that kind of role play is still important given that we're living in a more digital world now?

Leon Ward: Absolutely. Play is important. And very similarly, actually, the way that we introduce coins and cash quite early on is through a sorting activity where they're given a bag of coins and they have to sort them by colours or size, whether they've got gold or silver in, a few pounds and £2 coins. And whilst we do live in a digital world, actually cash is still influential in lots of areas of the world, whether that's in rural communities, coastal communities, towns that don't have the same banking access as cities have, cash in families where there might be builders, labourers, those sorts of things where cash is still king in those families. And also, most importantly, it gives you a real tool that we can all access in the home.

Iona Bain: Yeah. So you don't have to go out and buy a fancy shopkeeper set. You could just use your imaginations and-

Leon Ward: Yeah.

Iona Bain: ... and play.

Leon Ward: Use the real fruit and veg, you know?

Iona Bain: Yeah.

Leon Ward: Use that as an example or kids are very creative. You could even use a block of Lego to represent something. The more fun you have with it, the less educational it feels. And as we know, kids absorb things from a very early age, especially when they're having fun. And I think that's one of the things that parents should feel more confident about because they know what their kids are going to respond to better than anybody else. So they're probably the best person to teach them at least the basics that they feel comfortable with.

Iona Bain: And what would you say to parents who feel that this subject is already being discussed in schools? The likes of Money Ready do a great job teaching children in the classroom about this whole area. Therefore, perhaps parents don't need to be involved in this process.

Leon Ward: Schools are very congested places. They are trying to impart a lot of information on our young citizens, and financial education, even in the schools that are trying their best, it gets a very small amount of attention time. And continuing those lessons at home, money habits start to form from a really young age is probably the single- most powerful thing you can do after starting to introduce the concepts in school. Now, for lots of children who go home and that's not an option, then clearly the baseline that they're getting is in school, but the role of the family is extremely important, and we would just encourage parents to continue to do that.

Iona Bain: And what would you say to those parents that feel uncomfortable teaching some of this stuff because they themselves don't feel all that confident around their money?

Leon Ward: It's a really good point. And this is where I would say to people to stick with what you know. So start there, build your own confidence as you go, and you might be surprised at what you learn. There are some great resources out there like the Government's Money and Pensions Service has Talk, Learn, Do, which has by age a whole range of resources that parents can access at home. All three that have been quality- controlled by the Money and Pensions Service. And you'll probably end up learning, too. Most of the time when we go into school, teachers nearly always say to us at the end, " God, I learned something then." And actually that's important. That's why structured financial education and what's going at home have to come together.

Iona Bain: Yeah. And in a way, that is a very good message to be able to give your kids that you're learning as an adult, and that gives them the sense that you could be learning right throughout your life.

Leon Ward: Well, and money lessons in particular are definitely a lifelong journey. I think that's one of the key concepts. All we're asking parents to do is to start building the skills, knowledge, and confidence from an early age so that when children enter young adulthood and then adulthood, they feel confident to maybe ask three more questions when they're taking out a financial product or to think twice about that thing that they were going to purchase with their friends or to think four times about saying yes to that holiday before they go on it. And again, just knowledge, skills, and confidence, starting young because they are habits and lessons for life.

Iona Bain: And parents might also be wondering about how they can teach their child to be enterprising, to be able to earn their own living, and that feels particularly pertinent in the age of AI. What would your advice be for parents that are worried about that whole area and want to empower their children to be more entrepreneurial?

Leon Ward: There's a million 16-to-25-year-olds out of work at the moment. And one of the things or one of the solutions to this is to create an enterprising society that then goes out and builds their own business, builds their own wealth. AI is an inevitability now, and I think people have to start getting comfortable with it. I see it really from a financial education perspective as the great playing field leveller, really, because you can put in the questions that you feel embarrassed to ask in the privacy of your own home and get a broadly accurate summary.

Iona Bain: And are there any particular developments and trends that parents need to be responsive to and need to be on the front foot about? Because we're seeing more finfluencers online, many are sharing fantastic information and advice, but some are also encouraging quite risky behaviour among young people. So what would you advise parents who feel a bit out of their depth in that space?

Leon Ward: To be completely honest, it is a bit of a minefield. We live in an age of unlimited information all the time coming in various forms from people that look and sound credible. So it's like, " How do I determine what is advice and what is information?" And those two things are different. If you just want to learn the basics of stocks and shares, ISAs, of mortgages, of income protection, then those channels are fine. But if you want formal advice, then I think you need to go and find it from formal channels. The other thing I would say parents need to be aware of is risks and scams. Everybody thinks risks and scams target the elderly. They don't. They target everybody. They target people who are vulnerable in any given way, especially with young boys where we see things like the manosphere and all of that world taking on.

The lack of financial literacy, I think, exasperates that problem. So it's a lot for parents to get on top of, and I appreciate that, but there is a ton of resources out there that you can use, including this podcast, and other things where people can sense- check what they're hearing.

Iona Bain: Absolutely, and kind of training that next generation to recognize what is too good to be true.

Leon Ward: Yeah. And it nearly always is too good to be true and-

Iona Bain: That's it.

Leon Ward: ... where you are tempted to part cash for something that you think is going to make you rich quick, just don't do it.

Iona Bain: And pocket money has always been a good tool for parents to use when teaching their kids about money. What are your thoughts on how much kids should get, what they should get it for, and whether it should be paid as physical cash or in a digital way?

Leon Ward: I think in terms of how much, that's for every family to decide. I didn't get a lot of pocket money growing up because we were poor. The Tooth Fairy used to visit. I do remember that. 

Iona Bain: Right.

Leon Ward: But I had a paper round when I was 13, so that was my pocket money. I do think there is a nice learning point around rewarding children for things done. So if they're helping out with the chores, just a small bit of pocket money to top up their bank balance. I would encourage parents to potentially do both cash and digital. I don't see why it has to be one or the other. 

Iona Bain: Okay.

Leon Ward: You could also give cash, take them to the bank, put it in because, again, that's financial education without it being education, right? You're just-

Iona Bain: Yeah.

Leon Ward: .... taking the child to give the money into the bank. And that experience that many of us remember growing up when you used to get the piggy banks and banks used to incentivise children coming into branch. Where that has changed, I do think we do lose out on some of those lessons. But where the digital tools exist, I think you just deploy them in the same way that you're probably managing your own money. So helping your child to access their balance on the app, maybe helping them open a savings account and show them how the money grows without them having to do anything. That's a really good thing that digital banking shows with children's accounts. You can say to them, " Let's have a look at that in a month and see what happens." And it might be 10p higher than it was and they've not done anything to that. Teaching about interesting and saving.

Iona Bain: That's a very good point because whilst putting the money in a piggy bank is great because it will conserve that cash in one way, in another way with inflation and missing out on the interest and compound growth, that money's not doing anything. If anything, it's losing value. So being able to save into a formal account must be quite a valuable rite of passage for a young person.

Leon Ward: I think so. And also, you can encourage other family members. So if birthday money is something that happens in your family, you could have a conversation about saving some of that money. And these things, obviously, are easy to do the older children get, but you can start early with the basics. Start small, start simple, and just be confident with what you're doing.

Iona Bain: I've heard of some really interesting initiatives to try and help children build skills whilst also getting a bit of pocket money along the way. One is that you encourage your child to take a book from the library, read that book, and then give a presentation. And then, you will award money based on how good you think the presentation is. I think that's really innovative. I mean, you must have come across some interesting ideas that parents have around what they can reward their children pocket money for.

Leon Ward: Yeah, I think that's a great example because not only are you teaching public speaking skills or encouraging public speaking skills, but you're also doing money lessons blended into it. And that's the thing that we're getting at, really, is that money lessons can happen quietly, succinctly through other things going on in your household. Like as you say, pocket money for chores, pocket money for presentations, pocket money for helping with the cooking, maybe going out doing the shop. One of the things that I like, what parents do that I've seen, is that they set the budget for the social activities over half- term, but they say to the kids, " This is your money." And it might be physical coins that they give them or notes. " This is the cost of the activities. What do you want to do?" And you let the kids have the choice.

Now, that all sounds great until there's obviously no money and you're only on week two of your six weeks holidays, but that's where you can have those honest conversations about, " Well, rather than going out for a meal today, why don't we do a picnic? Because we could do that three times this week." And just negotiating with them. Parents are very good negotiating with their kids and kids are very good negotiating with their parents. So I would do that. And then, the other thing that we've seen with teenagers is something called loud budgeting where people say, " I'm not going to come for that drink because I can't afford it. It's not within my budget." So being really proud of the fact that you're managing your income and your expenditure just to kind of control some of those impulses that can happen with a bit of peer pressure.

Iona Bain: Yeah, that's a really good point because I think all parents have to contend with peer pressure, and it can be really hard, but you can teach your children really valuable lessons around financial limits and financial boundaries, and that will also feed into other healthy boundaries that young people can set.

Leon Ward: Yes. And if you are rewarding for chores, that's a really good way of showing children how long it takes to earn money. So if you are paying 50p an hour or 50p a clothes wash or whatever it is that the kids are doing and what they want to buy is £ 10, then that's a lot of hours they're going to have to put in. And again, a basic lesson about money early on that will stay with them for the rest of their lives. As an adult now, when I want to buy a little treat for myself, I kind of think, " Well, how long is that going to take me to earn? And what am I going to have to give up to do that or not save or can I not invest this month or whatever it is that I'm intending to do?" So I do think these things do stick.

Iona Bain: And I'm sure this will be really obvious to most people who are listening and watching this, but why is this so important for children to learn? And I suppose that the flip side of that is what happens to a child or a young person if they don't learn these lessons? What's likely to be the outcome in their life?

Leon Ward: I think that there's just a greater risk of financial harm. And I don't really like to use the word " mistakes" because everything contains a lesson. But what we don't want is people to have or to be caused financial harm. And that can be something as big as being a victim of a risk or a scam, but it could also be a something what feels quite small in the moment, but actually is quite big over time like opting out of your pension. One of the single most harmful things you can do for your long- term future is to opt out of your pension. Loads of younger workers do it, though, because they want more money in the bank at the end of the month.

So if you do that for five years, say, you're losing out on 40, maybe even longer, 50 years of compounding that you might have. So I think what we're trying to do is minimize risk and harm and also just create a generation that, as I said earlier, just ask maybe three more questions before they sign their life away on a phone contract or an actual employment contract or whatever it happens to be. Because the more minimisation of risk we could do, the bigger opportunity we have to grow wealth. And that is ultimately everyone's priority at the moment.

Iona Bain: Yeah, absolutely. And that can happen right across society regardless of your background or income. You have that chance to be able to make a difference in your life through becoming more financially aware.

Leon Ward: I think so. And you also will be a stronger negotiator around the table.

Iona Bain: Interesting. Yeah. We can end up with more engaged citizens as well as individuals. Right. Well, this has been such an eye-opening discussion, Leon. I think if we had to kind of, to pardon the pun, boil it all down to one thing that someone can think about whilst they go away and have a cup of tea and wait for that kettle to boil, what would it be? What can we do to help raise financially confident children?

Leon Ward: Give it a go. That's all we're asking. Look at the different resources that are out there. Your bank might offer some. There's Talk Learn Do, as we said, you can go on the Money Ready website and just try one or two activities. See what works, see what lands, and tinker it according to what works in your family. And also, lots of kids don't play board games now, but Monopoly is a great lesson in money. So feel free to use all the different things that are around your house. If they are gaming on the PS5 or whatever it is that they're doing, there's always an economy in those games, so you can also do money lessons there as well. So, as I say, start small, start simple, but just give it a go.

Iona Bain: Fantastic advice. Thank you, Leon. And that brings us to the end of this episode. We really hope there was some useful gems in there that can help you teach a child in your life some valuable money lessons. And remember, just start where you are and keep it nice and simple for the kids that you know and love. 

This podcast is brought to you by L&G. We would love it if you could share this episode with someone who has children in their life and maybe it'll help them, too. You can keep up with the show on YouTube, TikTok, and Instagram, @legalandgeneral. And if you've got a question or a topic that you would like answered on the show, you know what to do, get in touch on our socials. We'd love to hear from you. See you very soon and thank you for listening.