Context
There is a large evidence base showing that those with a high degree of financial capability in adulthood have in many cases developed it during childhood. While the Money and Pensions Service has conducted extensive research into financial capability among children and young people between 7-17 years of age, there is less evidence about the financial capability of younger children, aged between four and six. However, there is some evidence that suggests this it is important to support and encourage financial capability early in a child’s development.
The study
This 2019 report from djs Research aims to explore what financial capability looks like among four to six year olds, how it might be measured and how it might be supported by parents and those working with children under the age of seven. The report has the following research objectives:
- What financial behaviours, skills, knowledge or attitudes can be observed among four to six year olds?
- Which of these financial behaviours, skills, knowledge, attitudes and experiences may be particularly valuable indicators of financial capability in practice and helpful in the development of financial capability?
- How might financial capability in four to six year olds be measured effectively to indicate higher or lower financial capability?
- What experience of financial capability do parents have and how is this communicated to their four to six year olds (if at all)?
- •What aspects of financial capability do teachers and childcare providers communicate to four to six year olds?
The data collection methodologies incorporated:
- In-home paired depth interviews – 20 sessions were conducted with children, including activities such as coin recognition, saving, awareness of money, etc. Additionally, parents completed self-completion questionnaires to provide more insight into their child(ren)’s financial capability.
- Ten focus groups with parents of four to six year olds.
- Eight online discussion groups with teachers and childcare providers.
Research was conducted between September and November 2019. The interviews and focus groups took place across the UK, in all four nations and in a mixture of urban and rural locations. The majority of families were from homes classified as financially ‘squeezed’.
Key findings
- All children in the research understood the basic premise of shopping transactions.
- Children over five years old usually understood the idea of saving, though it was sometimes out of habit rather than with a savings purpose in mind.
- Confusion arose in relation to giving and receiving change, understanding value and borrowing money. Chip-and-pin or contactless transactions were not understood by children, in part due to the difficulty of explaining the ‘invisible’ element of this process which relies on an understanding of banking.
- Pocket money was not commonly given to children before the age of six years old.
- Money skills was not an area spontaneously mentioned by parents that they consciously prioritise in their children’s development.
- If parents don’t give children sufficient opportunities to lean about money in real life situations, it is thought they can be learning in a ‘vacuum’ in the classroom.
- From around six years old some parents did try to use everyday experiences to start discussions with their children about money.
- Children aged four typically know there are different coins and notes, can save money to use later, and make simple choices about how they spend their money.
- Children aged four to five are beginning to understand why money is used, understand coins and notes have different values, have ideas about why they may want to save money, and understand they need to take care of their money.
- Children aged five to six can describe and name different coins and notes, understand that they can save money to spend later instead of spending it now, and explain the difference between something they need and something they may want.
- Some children were beginning to understand that people may make different choices about how to spend their money, as well as being able to describe why they may want to save their own money.
- Teachers of year one and year two children in this study indicated additional support and resources were needed for teaching money skills. In Wales, teachers also needed improved resources in the Welsh language.
- The report concludes by making some suggestions to the Money and Pensions Service for the assessment and measurement of financial capability among young children, including direct measurement in schools and the indirect assessment of children via parents and teachers through surveys.
Points to consider
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Generalisability/ transferability: This report is of significant interest to policymakers, stakeholders and other parties interested in understanding financial capability among young children.
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Relevance: While the research is thorough and data is collected throughout the UK, it is qualitative in nature and would require further research and validation before using it as a basis to decide on the type of financial capability interventions that would be appropriate among this age group.
o However, the report is a valuable addition to the knowledge base surrounding financial capability and young children.
