Adults must get better at discussing their financial affairs if they ever want to escape money worries, experts have warned, as financial wellbeing tops the list of the nation’s personal priorities.
As Talk Money week gets underway – the annual drive to get Brits to open up about our money worries – a slew of behavioural finance studies has lifted the lid on what’s holding the UK’s population back when it comes to everything from the benefits of financial education to combating money-related sleep deprivation.
With more than one in five UK adults now feeling worse off financially than at any other time since the start of the pandemic, almost 70 per cent of those facing cash flow problems are also struggling with their mental health, data from Yorkshire Building Society found earlier this year, with many hit by depression, insomnia and anxiety.
And yet despite a quarter of the population worrying about their money at least once a week, only half feel comfortable checking their finances as part of a regular routine, Lloyds Bank has warned.
The drive for greater financial wellbeing is greatest among young adults but a lack of know-how and confidence continues to hold them, and older generations, back. That’s despite financial education forming part of the core school curriculum since 2014.
Last month the chancellor revealed plans for a nationwide programme to improve numeracy in schools in a bid to combat the skills gap. But at home, money is still a topic that gets left behind.
As many as four million parents and carers are keeping quiet when it comes to discussing financial affairs, while less than half of families take openly about money. This is causing millions of children to miss out on the early stages of building a positive relationship with their future finances.
And it’s not just the kids that could benefit, data from MoneyHelper, the government-backed money and pensions information service, suggests.
Talking about finances has been shown to help people make more informed and less risky financial decisions, feel less stressed or anxious and more in control, have stronger personal relationships, as well as help their children form good lifetime money habits.
The research shows that ultimately, a parent’s own confidence in managing money is key for them to open up about finances with their children. Parents who are very confident managing it themselves are twice as likely to have money conversations with their children than those who aren’t.
Talking openly about money not only will help children build healthy financial habits for later in life, it can also help parents improve their own financial wellbeing. Studies evaluating Talk, Learn, Do, a financial education programme for parents and children, have shown that parents who completed the activity were prompted to take steps to improve their own financial situation. Parents who were over-indebted – meaning they struggled to keep up with payments or felt their debts were a heavy burden before taking part in the programme – saw a 15 per cent decrease in levels of over-indebtedness afterwards, compared with parents who had not taken the course.
Caroline Siarkiewicz, CEO of The Money and Pensions Service, says: “We understand that for many parents, talking about money can sometimes feel like a daunting task amongst all the other things they have to think about every day.
“Some may not know how to start a conversation or feel they are helping their child by shielding them from the sometimes-tricky reality of household finances. But taking some time now to talk money with children can have benefits that last a lifetime.”
How to talk to children about money
Lead by example. There are activities you can do when you’re out and about to help boost your child’s money skills. For example, when you’re food shopping, take your children and make money-related decisions out loud like why you chose the shop brand cereal over the better-known brand, MoneyHelper suggests. And compare prices of items out loud or ask them to tell you the different prices of products.
Show them the whole picture. If you pay by card, rather than cash, don’t forget to show your child that this is part of your money management as well. Show them your current account balance before you use it in a shop. Then show them your balance afterwards so they can see it’s less than before. Do the activity again before and after withdrawing cash or shopping online.
Encourage them to save. It’s good for children to understand from a young age that sometimes you have to save money for things you want. You could start by asking them if there’s something they would like to save for. Help them visualise this by drawing a picture of it or creating a progress chart and help them come with up ideas to save money such as turning off lights or buying fewer things. Then, let them look after the savings in a piggy bank and when they have enough you can enjoy the family treat!
Use game power. Many digital games are based on the player collecting tokens that allow them to progress through levels or to get extra features. Turn household jobs into a similar game, giving them “tokens” they can exchange for rewards.