Cash-conscious kids left behind by financial institutions

The FSA report A cycle of disadvantage?: Financial exclusion in childhood shows children from poorer families have a higher awareness of how much money comes into their family each week, the range of household bills family income is spent on, and how bills are paid. By contrast, children from more affluent backgrounds are more knowledgeable about banking and other financial services, such as insurance.

The findings will be used by the FSA and others in providing better financial education in schools, and ultimately in finding ways of breaking the cycle of disadvantage faced by many children.

Commenting on the report, FSA Head of Consumer Education, Deborah Arnott, said:

This report vividly illustrates the fact that banks and other financial institutions figure barely, if at all, in the lives of children from lower income families, mirroring the extent of financial exclusion amongst their parents. At the same time, there are serious concerns that children from more affluent backgrounds, though better acquainted with financial services, have little or no grasp of fundamental money skills, like cash budgeting and saving.

This is the first in-depth analysis of the effects of financial exclusion on the knowledge and understanding of personal finance amongst children in the UK. As such it is of immense value in underpinning our efforts to boost financial capability through the classroom, and to prepare children from all backgrounds for dealing with money in the adult world, which we see as a key life skill.

We have already distributed Money Counts, a resource for primary school teachers, to over 25,000 schools in England and Northern Ireland. Primary schools in Scotland have received a Scottish version, and schools in Wales will be receiving copies in the Spring. The book marks the introduction of personal finance into the new curriculum from this year, and helps teachers develop financial capability in children between the ages of 5 and 11 years. Similar resources for secondary school teachers are in development.

Personal finance education should help enable all children, whatever their home circumstances, to become financially included in later life.

By providing practical help of this kind to teachers, we are helping to lay the foundations of greater financial capability in the future. Our aim in the long term is to break the cycle of disadvantage which todays report highlights.

The report was compiled by the Centre for Research in Social Policy at Loughborough University. Its findings are drawn from in-depth interviews with 52 primary school aged children from families of varying affluence, along with 7 class teachers and 3 head-teachers. Its key findings include:

• Children growing up in lower income families had limited opportunity to learn about the mainstream financial world, and so fail to acquire important financial knowledge and skills

• Children from lower income families were often involved in family budgeting, and were more likely to have learnt to replicate their parents sophisticated budgeting skills, than were children from wealthier families

• Children from less affluent families had learnt about inconsistent flows of family income, were more aware of how much cash was coming into the household, and were less likely to receive regular pocket money

• Compared to children from wealthier families, those from poorer families were less knowledgeable about, and had limited experience of, financial services and institutions

• Children from lower income families were more likely to be told their parents could not afford what they wanted, whereas those from more affluent families were given other reasons for not being allowed something

• Most teachers thought many children from wealthier families were at a disadvantage in that they only saw cash being used occasionally

• Teachers recognised the importance of personal finance and some saw it as a crucial life skill that should be clearly defined within the curriculum.

Notes for editors

1. A cycle of disadvantage?: Financial exclusion in childhood was compiled by the Centre for Research in Social Policy at Loughborough University for the Financial Services Authority. Copies are available from FSA Publications on 0845 608 2372.

2. A Schools and Colleges section is available on the FSA Consumerhelp webpages, for teachers in primary and secondary schools and for lecturers in further education and sixth form colleges www.fsa.gov.uk/consumer

3. The FSA will be hosting its second education conference for secondary school teachers on March 8th, 2001. Further information available from Gill Hind on 020 7066 0926.

4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

Appended information

This Consumer Research paper is available from the publications section of our web site. The direct URL is Consumer research 4: A cycle of disadvantage? - Financial exclusion in childhood [ PDF | 305 KB | 73 pages ].