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What Drives Financial Behaviour in Children and Young People

Evidence type: Insight i


The experiences of children and young people relating to money and finance have a deep and lasting effect on their financial behaviours and financial capability throughout the rest of their lives. In 2016 the Money Advice Service commissioned and conducted the Children and Young People Financial Capability Survey, to provide a deeper understanding of the levels of financial capability among young people. The survey generated a huge amount of data and findings, which are described elsewhere on the Evidence Hub. However, MAS also wanted to check that their conceptual definitions and understanding of financial capability were sound, and supported by the data.

The study

This 2018 paper had two main objectives:

To better understand the key components of children and young people’s financial capability.

  • This was achieved by creating composite measures of children’s financial capability. These measures are useful for measuring concepts that cannot easily be summarised by one indicator or survey question.
  • Financial capability behaviours (children’s actions with money) were measured, along with financial capability enablers and inhibitors, including:
    • Mindset: Children’s values and attitudes towards money;
    • Connection: Children’s engagement with money and access to financial products;
    • Ability: children’s financial knowledge and skills.

To understand the key drivers of children’s financial behaviour.

  • Enablers and inhibitors of financial capability and other factors in predicting financial behaviour were considered. Other factors explored included:
    • Demographics - child and household characteristics;
    • Parental influence;
    • Children’s socio - emotional/cognitive skills;
    • Children’s financial means.

The survey data was collected in 2016 and contains responses from 4,414 children and young people aged 7-17, along with a parent or carer for each participant. The responses are weighted to be representative of the population of the United Kingdom.

To identify the key dimensions of financial capability and identify the drivers of them, two statistical techniques were employed.

1. Factor analysis: to reduce a large number of survey questions into a smaller number of relevant combined dimensions of financial capability.
2. Regression analysis: to explore the isolated impact of potential influences on financial capability behaviours.

Key findings

The factor analysis grouped different aspects of financial behaviour into the following composite measures:

Financial capability behaviours, which combined survey questions on:

  • Day-to-day money management;
  • Active saving.

Financial Capability enablers and inhibitors of financial behaviours including:

  • Ability (children’s financial knowledge and skills):
    • Can carry out transactions;
    • Knowledge of adult responsibilities;
    • Knowledge of financial products;
    • Knowledge of financial concepts;
    • Financial numeracy.
  • Connection (children’s engagement with money and access to financial products):
    • Responsibility for financial decisions;
    • Engagement with bank account;
    • Involvement in household spending;
    • Experience with ‘phone payments;
    • Discussing money;
    • Digital engagement.
  • Mindset (children’s values and attitudes towards money):
    • Savings mindset;
    • Understand the value of money;
    • Shopping around;
    • Financial confidence;
    • Goal setting;
    • Attitude to financial situation.

The regression analysis then explored how these enablers and inhibitors of financial capability interact with and influence a child’s financial behaviour. The analysis also enables understanding of the role of other factors such as demographics, parental influence, existing skills and financial means.

  • The results suggest direct links between children’s financial behaviour and:
    • Their financial capability enablers and inhibitors (particularly mindset and connection);
    • Their financial means (whether children receive money and how regularly);
    • Parental influence – the parents’ own financial capabilities as well as their attitudes and behaviour towards their children and their finances.
  • Demographics seem to play a less important role, with financial behaviour usually related to parental influence and cognitive/behavioural skills.

The findings from this analysis have contributed to MAS’s children and young people Commissioning Plan, which states how resources can be optimally targeted to improve the financial capability of children and young people.

Points to consider

  • Methodological strengths and limitations:
    • This is a robust piece of analysis and appropriate methodologies are employed, along with statistical significance testing.
    • However, while factor analysis is one appropriate tool for this method of data reduction, there are criticisms often levelled at this technique for over-simplification or arbitrariness.
    • While regression analysis highlights relationships between financial capability enablers/inhibitors and financial behaviours, it is possible there are further underlying factors that are not captured by the survey or are unobservable.
  • Relevance:
    • This report is relevant to all stakeholders, academics and policymakers who wish to understand the conceptualisation of the different domains of financial capability.
  • Generalisability/transferability:
    • Due to a suitable sample and robust methodology, these findings can be treated as robust and representative of the UK population, keeping in mind the above caveats.

Key info

Year of publication
United Kingdom
Contact information

Tom Clarke, Shadi Ghezelayagh (Money Advice Service) Andrea Finney (Social Research and Statistics)