Children least financially literate are from more deprived areas, recent charity study shows

Research shows that children with low financial literacy scores tend to come from poorer areas (@MyBnk). 

In collaboration with the award-winning charity MyBnk and independent evaluators Substance, The Centre for Financial Capability surveyed over 4,000 children from 50 schools nationwide. We found there is a correlation between young people who are most in need of financial education and financial deprivation.

These children also benefit the most from expert-led intervention – their financial knowledge, skills and savings rising by 56% as opposed to an average of 7% nationwide as a result of money lessons.

According to the survey, only one third of children with low financial literacy levels receive regular pocket money. Conversely, children who regularly receive pocket money are more likely to have higher financial literacy. A recent study from the Money and Pensions Service shows that only 48% of children in the UK receive a meaningful financial education.

The Centre for Financial Capability found that children most in need of financial education are more likely to attend schools that are located in areas that are high on the Income Deprivation Affecting Children Index and on Indices of Multiple Deprivation.

Other findings:

• 86% of schools with children most in need of financial education were located in areas with a higher IDACI rating.
• 67% of schools with children most in need of financial education had above the national average of pupils eligible to receive free school meals.
• 76% of schools with children most in need of financial education were located in more deprived areas.

The Centre is a new charity, founded by the backers of the KickStart Money initiative. KickStart Money is an award-winning coalition of major UK financial institutions which raised £1.2 million to fund expert-led financial education to over 20,000 primary school children. As money forming habits begin at the age of 7, it is vital that financial literacy and capability must be included in the national curriculum at primary level. The Centre for Financial Capability aims to give every primary aged child “an effective and high-quality” financial education by 2030, and has a long-term commitment into financial education and research.

Guy Rigden, CEO, MyBnk said:

“When it comes to a core life skill, financial capability, we have identified a worrying early indicator of divergence in the life chances of children from poorer backgrounds compared to their peers from more affluent areas.

This study also reveals the huge potential of targeted expert-led education in improving attitudes and behaviours towards money and sparking life long habits like saving. Those who need financial education most benefit the most – it literally elevates the playing field.

Prevention is always cheaper than the cure and we are calling on education departments, financial services and corporates to back what works in our classrooms to help close the gap and address one of UK’s deepest root causes of poverty”

Jane Goodland, Trustee of The Centre for Financial Capability said:

“Financial education can close the financial capability gap, and support children from financially deprived backgrounds to succeed. Without a high-quality and effective financial education, young people lack financial capability and a thorough understanding of money skills and are at risk of facing financial difficulties in later life.”

“The Centre for Financial Capability recognises the importance of financial education for all children. As our research shows, it is crucial that children from poorer areas, who may have a lower financial capability, are given an opportunity to develop their financial literacy skills.”

Primary School teacher, London:

“Disadvantaged children benefit a lot more from financial education.”

“It tends to be children that qualify for either the Pupil Premium or Free School Meals – this is over two-thirds of our school and nearly half have English as an additional language. It could also include the fifth of our children who are on the SEND register, or children with safeguarding concerns.”

“A lot of our children won’t have had the experience of having pocket money to spend, or purchase, especially during lockdown. That’s accelerated in an economy that’s moving away from using cash. So, these are children that don’t have practical lived experience of money because they aren’t able to, or it’s just not part of their normal family routine. We find it day-to-day in the classroom when our teachers talk about money. It’s not a concrete thing for children any more.”

“In the last 18 months there have also been barriers to our children becoming financially literate via virtual money lessons. I have seen from our data that many live in cramped environments and lack a suitable device. Then there’s broadband, or WiFi capacity, or the data availability. There’s often more than one child in that household all trying to get access and lots of our families only have a mobile phone.”

“Proper expert-led and in class money lessons gives them that first financial education experience. They take that experience home and can influence a family decision with their opinions. It’s about feeling confident, and having a greater understanding.”