Every child needs to learn about dangers of getting into debt

Would you talk to your nine-year-old or grandchild about debt? What about bailiffs or mortgages? Most of us would avoid discussing money issues with such young children, but DebtAware, a financial education charity, plans to change that.

Today I joined a fifth form class at St Mary’s Catholic Primary School in Chorley, Lancashire to see first-hand the work the charity does.

The sunny classroom, decorated with colorful posters about the importance of reading, is quiet. At the table in front of me, students are engrossed in a worksheet on the difference between good and bad debt.

In today’s economic climate, the need for financial literacy could not be more urgent.

Debt was the topic of the morning’s conversation and one student, Isabelle, aged ten, told me eagerly that she was saving money to buy her first home. “When I see something I want, I look at how much money I have and remind myself that I need other things,” she says, keen to show she’s learned the lesson.

The average level of debt in the UK has risen by 19 per cent since 2022, according to personal insolvency provider Creditfix.

Nearly six million low-income families have unsecured debt of around £14.2 billion by May 2023, according to the charity Joseph Rowntree Foundation.

Almost six in ten of those who say they use credit to pay bills have less than £200 in savings. Since it began visiting schools in January 2013, DebtAware has taught more than 80,000 children money management skills, including how to budget and take out loans. This year, he will teach lessons in about 100 schools in the Northeast.

The program is run by the Debt Advice Foundation, a national charity offering free and confidential help to people worried about loans, credit and debt.

Around three-quarters of 18- to 24-year-olds say they wish they had been taught more about money at school, according to research published last month by digital payments provider Pay.UK.

Back in the classroom, today’s lesson is led by Brian Souter, a DebtAware volunteer.

An animated retired teacher with more than 50 years of experience, Brian captures students’ attention from the moment he enters the classroom.

“The Debt Advice Foundation helps people who are in debt, but our role is prevention rather than treatment,” he says. “Our aim is to give children the knowledge, understanding and skills to develop a good attitude towards money and to be sensible and secure. At this age, children will learn the right skills, but by middle school it may be harder to make an impression.

Today’s session aims to teach a fifth grade class the difference between wants and needs. In the coming months, this class will also learn about budgeting, payments, savings and loans. “What is a debt?” Mr. Souter asks the class in a singsong voice.

“Debt means borrowing money and having to pay it back,” the children chant in unison as they read from a worksheet.

The lesson covers money matters in great detail and it is fascinating to watch the class discuss the importance of good debt. Good debt is money borrowed for a reason that has a lasting benefit and repayment of the loan is within your means.

Another worksheet gives the children definitions of financial conditions, including mortgages, credit cards and bailiffs.

There is no obligation in the national curriculum for primary schools to teach their students about money.

Instead, schools may decide to work with the charity PSHE Association to develop their own curriculum, which may include lessons on saving and spending and how to get value for money.

The government recommends that children be taught about debt only when students reach secondary school age.

Yet all the kids I talk to are already aware of the dangers of running out of money. Among them is ten-year-old Declan, who proudly shows me his black Fitbit smartwatch, which he uses to track his spending.

“Learning about money now means we won’t make mistakes when we grow up,” he says confidently. “I’m saving my money now so I can have even more when I grow up.”

Fifth-grade teacher Lisa Hesketh believes it’s essential to give children the knowledge to manage their own finances.

“In each unit, debt is revisited to make children aware that there is good debt and bad debt,” she says.

“These children need to have knowledge and understanding of money from an early age to make them more confident later. They can then ask questions about everyday life and talk to their family at home.”

For Isabel, these lessons will help her become one step closer to her dream of one day owning her own home.

“My family and I rented for three years and lived in three different houses. Now we will get our own house,” she tells me proudly.

“I have a bank account that I put my money into as I want to make sure I’m investing now so that when I’m old I’ll have enough money to buy a decent house.”

Maybe we could all do with a lesson or two.

… and here’s how you can teach your own children

You can start talking to children as young as three or four about money – as soon as they start asking questions, suggests Money Helper, a government-backed money guidance website.

At this age, many children can understand that items cost different amounts of money, so try talking to your child or grandchild about how much things cost the next time you go to the store. When you shop together, you can ask them to pass the money to help them practice counting coins and bills.

By the age of five or six, children begin to understand the concept of saving, so encourage them to set aside some of their pocket money each week for a toy they want.

By the time a child reaches seven or eight years old, he can tell the difference between wants and needs. Try asking them to categorize different items, such as a laptop, a cell phone or a pair of sneakers, according to whether they’re a want or a want—or both, using a Venn diagram—suggests DebtAware’s Brian Souter. You can also ask them to identify good and bad reasons for borrowing money.

When they consider spending their pocket money, you can also ask them to write a shopping list of what they will buy and how much it will cost.

When your child starts middle school, you can start talking to them about being responsible with money. Between the ages of nine and 12, children usually begin to understand how to keep a budget and check a receipt or bank statement.

At this age, children are ready to learn about debt, so discuss why you pay interest when you take out a loan and ask them what they would do if they couldn’t pay it back.

A good way to build on existing knowledge is to offer the chance to earn extra money by doing extra chores.

You can also set them a goal to save for things they might want.

For more tips and tricks visit moneyhelper.org.uk/en/family-and-care/talk-money.