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The value of teaching about money; The debate over financial education is hotting up. So when is the right time to start teaching the value of pounds and pence? Vicky Shaw reports.

Byline: Vicky Shaw

With university fees placing young people in debt early in life and the growth in expensive payday loans, the next generation needs to understand its APRs just as well as its ABCs. But new research has revealed a worrying lack of skills among many teenagers and young adults when it comes to managing their money.

The study found that more than two-fifths of 14 to 25-year-olds were unable to recognise the letters "CR" on a bank statement as meaning that a balance was in credit.

In another warning sign for the nation's future finances, more than a quarter of young people did not know that it would be better to opt for a lower APR (annual percentage rate) than a higher one when taking out a credit card or a loan, according to the report by Barclays and charity pfeg (Personal Finance Education Group).

Successive governments have been trying to encourage more youngsters into a lifetime savings habit, with the introduction of Child Trust Funds and, more recently, Junior Isas.

So how old should children be when we start arming them with the skills they will need to navigate the world of finance? It could be much earlier than many of us think.

The Government recently announced that financial education will become compulsory in English secondary schools from next year, a move that will bring the country in line with the rest of the UK.

However, there are growing calls for politicians to go much further by giving children better financial knowhow from primary school onwards. Recent research published by the Money Advice Service, an independent body set up by Government, found that youngsters have already formed their money-management skills by the age of seven.

Behaviour experts at Cambridge University, who compiled the report, said most seven-year-olds have already grasped how to count out money and know that it is used to buy goods. They have also worked out what it means to earn money, what an income is and how to plan ahead.

Children were found to pick up many of their financial habits by copying their parents' behaviour - both good and bad.

So if you're a mother or father of a young child then be warned: you need to add "bad money management" to the list of things not to do in front of the kids.

Showing a child how to handle their money is a fundamental life skill, as important in its way as teaching them to read and write.

When I went to university, I was lucky enough to benefit from a student grant which saw me through most of term-time and meant there was a less pressing need for me to take on a part-time job to help see me through my studies.

But if my two-year-old son decides to study for a degree, as well as choosing the course and the college, he will also have to weigh up some big decisions about borrowing and debt which will have a long-lasting effect on his finances.

If we are to stop youngsters getting themselves into avoidable money difficulties, it is vital for parents to "break the British taboo" and talk more to their children about the family budget, according to Tracey Bleakley, chief executive of pfeg.

She believes that money management is a skill that should be learned in school but reinforced at home, which could involve activities such as explaining more to children about buying decisions during trips to the supermarket, for example.

Bleakley says: "We know from our work on the ground that financial education works best when it starts from a young age.

"Securing a place for personal finance in the secondary national curriculum has been a big leap forward - but as the recent MAS research confirms, we need to be teaching children about money in all primary schools as well."

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Title Annotation:Features
Publication:The Birmingham Post (England)
Date:Jun 13, 2013
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