Role of the Family in financial education

Money management is one of the many crucial life lessons that parents must pass on to their children. As Wim Mijs, Chief Executive of the European Banking Federation, said last year, no one can replace the parents as the main guide for children learning how to deal with money. With this in mind, let’s assume the important role of families in teaching a skill that will be vital at all stages of life.

Despite the general tendency of leaving the responsibility of education to teachers and institutions, many studies have shown that the role of parents should not be overlooked in equipping children for such an important life commitment. The positive impact of providing a nurturing learning environment for children is invaluable in every aspect of life, and financial education is no exception. However, some adults find finances complicated enough to understand themselves, let alone to teach children their intricacies. But there is a middle way: allowing children to become familiar with conversations about money and helping them acquire the terminology that they will soon need to put into practice. Children who receive a sound basis from their parents stand a good chance of growing up being better informed and more careful with their budgets than their peers.

Nelly Guet, from Alerteducation, published an article on the magazine of the French Federation of Parents (APEL): L'éducation financière est une aide au choix, pour la vie (Financial education is a help to the choice, for life). In her efforts to include financial education in schools, she argues financial literacy is the chance for students to understand the world they live in and to become more autonomous when taking lifetime decisions. At the same time, financial education contributes to a more equal society: “There is a link between financial literacy and family history: those who have these skills come in a huge proportion of highly educated families with sophisticated means in terms of finance. To ensure equal opportunities, it is important to provide financial education to those who would not have access otherwise”, she said.

In 2013, the Money Advice Service in the UK urged parents not to "underestimate the effect their own good (and bad) money habits will have on their children”. According to a study conducted by researchers at University of Cambridge, most young children grasp all the main aspects of how money works and children's financial habits are formed by the age of seven. Caroline Rookes, chief executive of the Money Advice Service, said: “This study really demonstrates the power of parental influences, and illustrates how much of what you learn and absorb when you are young, both consciously and subconsciously, affects the choices you make throughout the rest of your life."

We should not leave schools alone to teach children everything they need to know about life, as parents play a key role in this essential task. This should be a joint effort to ensure that children absorb the concepts and transform them into habits. For financial education, one thing is certain: no one can afford to ignore money management, so we’d better be ready for it!

(Source: European Money Week)