Newswise — According to a recent research conducted on 3,745 families spanning the United Kingdom, there exists a significant disparity in financial literacy among children, with variations observed across different socio-economic groups.
The study emphasizes notable disparities in the financial competencies of young individuals, underscoring the findings that indicate a lack of essential financial skills among disadvantaged children.
The expert team from UCL, whose findings were published in the esteemed British Journal of Educational Studies, advocates for an increased focus on cultivating financial skills in children, beginning at the primary school level. This emphasis is particularly crucial for children from socially disadvantaged backgrounds. The team highlights the necessity of carefully considering the delivery of financial education specifically tailored to this group.
In the United Kingdom, there is growing apprehension regarding the limited social mobility and the persistent transmission of educational and social disadvantages from one generation to the next. This concern encompasses the cyclic nature of financial difficulties, poverty, and debt that can be associated with socio-economic disparities in the financial skills of young individuals.
Professor John Jerrim, from the Social Research Institute at UCL, emphasizes the importance of public scrutiny and debate regarding the increasing disparities in socioeconomic status, particularly in financial capabilities.
In our study, we discovered that children from disadvantaged backgrounds are less inclined to discuss financial matters during their school lessons. Furthermore, we observed a significant gap in the provision of financial education, especially towards the later years of primary school, highlighting the impact of socioeconomic status.
Socioeconomic gaps become apparent at an early stage of life and often endure into adolescence. While some of these disparities can be attributed to variations in children's cognitive and socio-emotional abilities, it appears that discrepancies in financial capabilities based on socioeconomic status are not solely a result of inequalities in these other domains.
Based on our findings, it appears beneficial for young individuals from disadvantaged backgrounds to receive early engagement and education regarding money matters.
The study utilized a nationally representative data sample extracted from the 2019 Children and Young People's Financial Capability Survey. This survey assessed the financial capabilities and behaviors of British individuals aged 7 to 17 years. To gather additional information, the authors conducted both online and face-to-face parental questionnaires.
The findings of the study indicate that children from wealthier backgrounds possess significantly higher financial knowledge compared to their counterparts from less privileged backgrounds. Specifically, young individuals from affluent households tend to have greater exposure to financial education prior to entering secondary school.
According to the experts, a contributing factor to this issue is the level of interaction children have with their parents. Children from more disadvantaged backgrounds have fewer conversations about money with their parents and are less likely to receive guidance on understanding how money functions from their caregivers.
"However," states Dr. Jake Anders, Deputy Director of the UCL Centre for Education Policy & Equalising Opportunities and co-author of the study, "although we observe that these parental interactions can explain a portion of the socioeconomic disparity in terms of money confidence, money management, financial connections, and financial behaviors, these interactions have less significance in enhancing financial abilities."
The authors suggest that in the future, the government and financial providers could potentially assume a more significant role in addressing this issue.
Children from disadvantaged backgrounds, especially at a young age, are significantly less likely to possess a bank account, which can hinder their development of a strong connection with the financial realm. To enhance their financial connection, including their mindset and skills, it would be beneficial to promote the utilization of financial services among socioeconomically disadvantaged families and their children.
One possible approach could involve the establishment of a young person's account that is linked to the government's Help to Save account, which is accessible to individuals with low incomes. Such an initiative could offer higher interest rates and rewards for fostering positive saving behaviors.
This research, funded by St James's Place Wealth Management, has certain limitations. One such limitation is that only one parent participated in the survey, potentially limiting the perspectives provided. Additionally, the quality of certain measures, such as the information gathered regarding children's educational attainment and socio-emotional skills, was somewhat constrained.
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