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Children’s financial capability: four to six year olds

Evidence type: Insight i


The Money and Pensions Service aims to guarantee that all children and young people have the financial education they need to be able to manage their money well and make correct financial decisions later in life, as they become independent. There is a range of evidence from child development research that shows the significance of starting to support and encourage financial capability early, from the age of three and definitely before the age of seven. The 2016 Children and Young Person’s Financial Capability Survey attempted to understand what children aged four to six are learning about money, but there has been little other research among this age group.

The study:

This 2019 report from the Money and Pensions Service, and prepared by DJS Research, had 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 currently?
  • What aspects of financial capability do teachers and childcare providers communicate to four to six year olds currently?

The research captured views from 39 four to six year olds, 75 parents of four to six year olds, and teachers and pre-school educators. Several research methods were employed, including:

  • In-home paired depth interviews with children;
  • Ten focus group discussion with parents;
  • Eight online group discussions with teachers and childcare providers.

Fieldwork took place in all four nations of the UK between September and November 2019.

Key findings:

  • Overall, the research indicates that children’s comprehension of money and related skills are limited to a basic comprehension between the ages of five and a half to six years old, while younger children (five and under) show few signs of financial capability and understanding.
  • Coin recognition is hard for school starters, as their numeracy often isn’t developed enough, while the ‘£’ symbol is often mistaken for a ‘3’. Notes and coins are usually still referred to as pounds and pennies.
  • The report found that all of the children in the research understand the basic premise of shopping transactions, such as a shopkeeper and the customer and the exchange of money for goods.
  • Children over five years old generally understand the concept of saving money, though this is often out of habit rather than with a savings purpose in mind.
  • Children are typically unaware of savings accounts opened in their name, though parents confirm that they exist. This, coupled with the fact that children rarely visit a bank or see them on the high street, means the concept of a bank is not widely understood.
  • Confusion often arises in giving and receiving change, understanding value and borrowing money.
  • ‘Invisible money’ such as chip and pin or contactless transactions is a concept that was not understood by the children in the research.
  • Pocket money was not commonly given to children in the research before the age of six years old. However, children under six did occasionally receive rewards such as sweets and comics, effectively bypassing a potential money skills learning opportunity.
  • Money skills are not mentioned by parents as an area that they prioritise in their child’s development, due to the complexity of the subject matter and some parents feeling ill-equipped to ‘teach’ their children.
  • It’s felt that if parents don’t give children sufficient opportunities to learn about money in real life contexts, classroom learning can be in something of a ‘vacuum’.
  • From around six years old, some parents do try to use everyday opportunities for their children to learn about money. This can include supermarket shopping and letting the children pay for items themselves, as well as earning money via pocket money.
  • These everyday experiences are the primary drivers of money skills comprehension for young children, with school lessons providing the necessary mathematical skills and role-playing scenarios to support this real-life learning.
    • Key indicators of financial capability among children include:
      • At four years of age children sometimes know there are different coins and notes; know they can save some money to use later; can spend money in different places and on different things and can describe why they might want to save their money.
      • At four to five children begin to understand what money is being used for; can makes simple choices about saving money; begin to understand that notes and coins have different values; and know that they need a safe place to look after their money.
      • Between five and six children can describe and name different coins and notes; understand that money has a value and needs to be taken care of; know they can save money now to spend later.

Points to consider:

Methodological limitations :

  • While the research is qualitative and not definitively representative of the UK, the work gives a robust snapshot of young children’s understanding of financial capability.


  • This report is relevant to any stakeholders with an interest in financial capability among young children.

Key info

Client group
Year of publication
Contact information

Gill Redfern, Research Director, DJS Research