A new study of 3,745 families from across the UK shows there is a ‘significant’ gap in children’s financial literacy depending on which socioeconomic group they belong to.
The research highlights significant disparities in the financial capabilities of young people, and findings indicate that disadvantaged children do not develop basic financial skills.
In the results published in British Journal of Educational StudiesA team of experts from UCL calls for a greater focus on developing financial skills among children starting in primary school, particularly geared towards those from disadvantaged social backgrounds, with “a particular need to consider how financial education can be provided” to this group.
“There has been a lot of concern in the UK about a lack of social mobility and a tendency for educational and social disadvantage to persist across generations. This includes intergenerational cycles of money problems, poverty and debt, which may be linked to social and economic inequalities in the financial capabilities of young people.”
“With large socioeconomic gaps emerging, the issue of financial inequality needs more scrutiny and public debate,” explains lead author Professor John Jeremy, of UCLA’s Institute for Social Research.
“What we found in our study is that children from more disadvantaged backgrounds are less likely to report covering money issues during their schooling, with a significant socioeconomic status gap in the provision of financial education towards the end of primary school.”
“Gaps appear early in life and can often persist into the teenage years. Only part of these gaps can be explained by differences in children’s cognitive and social and emotional skills. It appears that socioeconomic differences in financial capabilities may not simply be a reflection of inequality in these other areas.
“Overall, our findings suggest that it may be beneficial for young people from disadvantaged backgrounds to deal with money early in life.”
The study used a nationally representative sample of data from the 2019 Children and Young People’s Financial Ability Survey, to measure financial capabilities and behaviors among Britons aged 7 to 17. The authors then conducted online and face-to-face surveys of the parents.
Their findings show that financial literacy is much stronger for these children from wealthier backgrounds—these young adults from richer backgrounds have financial education before high school.
Experts have found that part of the problem relates to the interactions children have with their parents. Those from more disadvantaged backgrounds have less frequent money conversations with their parents and are “less likely to be shown how money ‘works’ by their caregivers.”
“However,” adds co-author Dr Jake Anders, Deputy Director of the UCL Center for Education Policy and Equal Opportunity, “While we find that these parental interactions can represent part of the socioeconomic gap in trust with money, money management, financial connections, and financial behaviors, these interactions are less importance in strengthening financial capabilities.
The authors state that enforcement by government and financial service providers could play a more important role.
“Disadvantaged children are less likely to have a bank account – especially when they are young – which may mean that they are less likely to develop a strong relationship with the financial world. To help improve financial connectivity – particularly aspects of their thinking and skills – more can be done to encourage the use of financial services among socially disadvantaged families economy and their children.
“This might include, for example, a young person’s account linked to a government savings assistance account available to low-income earners that effectively pays higher interest rates and provides rewards for positive savings behavior.”
Limitations of this research include the participation of only one parent in the survey. The quality of some available measures was also limited, such as information collected on children’s educational attainment and social and emotional skills.
socio-economic inequality in the financial capabilities of young people, British Journal of Educational Studies (2023). DOI: 10.1080 / 00071005.2023.2195478
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