Financial capability of children, young people and parents in the UK 2016

1. Context
2. The study
3. Key findings
4. Points to consider

Context

In order to support the delivery of the UK Financial Capability Strategy, the Money Advice Service (MAS) aims to ensure that all children and young people get the financial education they need to become financially capable adults.

The study

MAS commissioned the study to:

• Provide a baseline measure of financial capability among children, young people and their parents
• Provide a snapshot of the current financial capability of children and young people in the UK
• Explore the drivers of good and bad financial capability within this group, including the role of financial capability of families.

BMG research collected data from questionnaires administered online or by personal interview of 4,958 4-17-year-olds. A parent or carer was also interviewed for each child. There was some variation in questions by age, and between children and young people on the one hand and parents on the other. Interviews were conducted in 2016 and the sample was weighted to be representative of the UK population, different age groups, gender, region, ethnicity, local deprivation levels and urban/rural location. The report includes a wide range of robust results and analysis of key themes. MAS plans to publish further analysis of this dataset in the future, looking specifically at parenting and vulnerability.

Key findings

Financial education at home: Parents’ decisions about how to teach children about money and about how much freedom and responsibility they allow affect young people’s financial capability:

• Children who were involved in or made decisions about spending money performed better on a wide range of financial capability measures. For instance, 19% of children whose parents made spending decisions for them were worried about the idea of borrowing, compared with 4% overall.
• Children who regularly receive money have higher financial capability. They are more likely to have a bank account, to decide for themselves how they spend their money and whether they save any of it, and to shop around for better value.
• Overall, 63% of children had a bank account, while 67% of 7-17 year-olds received pocket money and 34% of 16-17-year-olds got some money from work.
• 94 % of children had some experience of saving, but levels of regular saving could be improved in order to support capability.
• While parents recognise the importance of teaching children about money, many are not confident in doing so and have low financial capability scores themselves. This implies that there may be value in interventions that address both of these concerns.

Financial education at school: Many children report having money of their own from the age of 4, so needs and possibilities for early financial education are evident:

• Although financial education is on the school curriculum at least at secondary level across the UK, only 40% of children and young people report having received it – across all age groups.
• Children who recall learning about money management at school are more likely to ask parents or teachers for money advice, be more confident in managing money, understand bank accounts and how savings accounts, payday lending and government bonds work. This suggests a relationship between financial education and positive approaches to money management, although research is needed to understand this better.
• There is evidence that 16-17-year olds are not necessarily prepared for adulthood. Four in ten 16- to 17-year-olds (39%) don’t have a current account, and 18% have no bank account at all (neither savings nor current account). Of those that do have an account, 32% have never deposited money, 40% have never been into a bank, and 40% don’t look after their own banking details.
• Only 41% of 16-17-year-olds could read a payslip correctly and 18% could not identify the correct balance from a bank statement.

Vulnerability: The study identified some indications that some groups had financial capability needs; further research was needed to investigate this in many cases, although vulnerability was very evident among two groups:

• Low income is associated with low levels of adult financial capability, and this factor seems to be shared with children in low-income households. Such children are more likely to feel unable (25%) than those from high-income households (15%) to make a difference to their financial situation, while 68% of parents from low-income households saw themselves as good role models compared with 83% in high-income families. Children in wealthier households were more likely to receive more money and to have jobs. But it is important to remember that children from low-income households have many strengths to build on, in particular their confidence with money is not affected by income.
• Low financial confidence: As is the case with adults, there is a relationship between children’s low financial confidence and positive financial knowledge, attitudes and behaviour. Higher confidence is associated with frequency and level of savings, keeping track of money, being involved in financial choices, being cautious about borrowing, feeling in control of money, having more life goals, shopping around, and getting questions about financial ideas and products right.

Points to consider

Methodological limitations:

• The report includes many robust results across a range of categories; the key findings above reflect the author’s analysis and interpretation of them.
• The sample is representative of the 4-17-year-old UK population across a range of demographic factors.

Relevance:

• The study includes data and analysis of great relevance to planning, implementing and evaluating financial education and linking these to wider capability strategies.

Generalisability/ transferability:

• The report (and notably key findings) summarise broad results and trends; more granular findings are available within and via the report.

Full report

Financial capability of children, young people and parents in the UK 2016 full report