Measuring Financial Literacy of Children Aged 4 to 6 years: Design and small-scale testing

• Description of the programme
• The study
• Key findings
• Points to consider

Description of the programme

Previous evidence suggests that children start to learn important money skills and habits between three and seven years of age and that early learning experiences can have a direct impact on the ability to manage money later in life. While the Money and Pensions Service already has standard measures of financial literacy for children aged seven and older, these measures are not appropriate for children younger than seven in content or format.

The measure uses comic strips as prompts within one-to-one interviews with children aged four-to-seven-years old in order to measure their financial literacy (defined as a combination of children’s understanding of money management and finance concepts and their ability to describe their own experiences with money). Children are presented with a standardised narrative alongside the comic strips and they are asked standardised questions, their responses to most of which are scored systematically using a 0,1,2 scale (where 2 indicates good or developed understanding of the concept, in which the child illustrates a high level of knowledge and holistic understanding of the concept).

The measure has so far been delivered to children in one primary school, one nursery and via video call with parents as part of the small-scale test reported here.

The study

While there are existing tools to measure financial literacy among children aged seven years and older, this project aimed to develop and test such a measure that would be appropriate for measuring the financial literacy of children aged four to six years old.

The study first identified a set of concepts and experience to include within a measure of financial literacy and developed a story-based approach, using a series of comic strips, to engage children during one-to-one interviews. It then undertook small-scale evaluation of the materials in 20-minute interviews with the study’s researchers, which focussed on children’s engagement with and understanding of the new materials, to test the usability and feasibility of the measure.

A total of 35 children aged four to six (19 boys, 16 girls) took part in the interviews during February and March 2022, 20 in person in a primary school, five in person in a nursery, with a further 10 via video call with parents present. Data were recorded using the Qualtrics survey platform and a priori qualitative fields.

Key findings

• Concepts requiring measurement: The literature identified a list of concepts to measure, comprising: Knowledge of money, spending money, saving money, keeping track of money, planning and budgeting, borrowing and lending, and where money comes from.
• Initial changes to material design: After testing with an initial 10 study participants, some issues which caused difficulties around the comprehension and clarity of the materials were addressed. Clarity and understanding were shown to be improved following these changes.
• Children’s understanding of the materials: The measure appears to have good face validity in respect of children’s understanding and it returns a good range of scores in this respect. There was no evidence of a bias in scores between boys or girls based on the test data.
• Children’s engagement with the materials: The measure is engaging for children, they demonstrated a vested interest in the comic-strip character’s decisions and became involved in discussions around what he should do next.

Points to consider

• Methodological strengths/weaknesses: The authors note that the COVID-19 pandemic limited both the size and diversity of the participant sample available for the study because many educational settings were not able to accept visitors at the time the research was undertaken.
  • The authors note conflation of online delivery with the presence of parents and that further evaluation may be needed to determine if delivery mode per se affects children’s understanding and engagement, whether or not parents should be present during interviews, and if the scoring system needs adjust into take into account any parental intervention.
  • While the authors find the new measure has face validity they note that its reliability and validity in the target population are not yet tested.
• Generalisability/ transferability: The authors note that further rounds of data collection will be needed in order to increase confidence in the financial literacy scores produced in the small-scale test. The results given in the report (and which are not given in this summary) should not be generalised to children as a whole, therefore.
  • The secondary inclusion of monetary incentives, after launch, will tend to reduce the generalisability of the results of the intervention (i.e. the email wording) on its own to other payroll schemes. In other words, it will have affected outcomes across all three test conditions and may therefore show artificially high impact.
• Applicability: Given the limited size and diversity of the participant sample available for the study, it is not possible to conclude with confidence that the measure is widely applicable to all children aged four to six.
  • The authors do not state where, geographically, the study was undertaken and it is assumed for the purposes of this summary to have been undertaken in one locale. Its applicability to other locales, and especially nations of the UK, is therefore unknown.