Teaching Your Kids Simply Put About Money

Child with a money boxFinancial habits are formed by the age of seven, according to research by Cambridge University1 for the Money Advice Service. By this age, the report says, most children in the UK are capable of complex functions such as planning ahead, delaying a decision until later, and understanding that some choices are irreversible.

Although learning about money is now part of the national curriculum for secondary schools in England, it isn’t specifically included in junior school lessons. However, there are many ways of gently introducing younger children to the world of finance.

Learning To Save

Junior Individual Savings Accounts (JISAs) are a good way for children to learn about the value of saving money for the future.

The advantage of a JISA is that they are tax free, and once the account has been opened by the parent or guardian, anyone can make contributions, including grandparents, friends and family. The savings limit for the current tax year is £4,080. Children gain control of their JISA at age 16, but the money cannot be withdrawn until the child is 18.

At that point, the account is automatically rolled over into an adult ISA, a valuable facility for those who want to continue saving or investing tax-efficiently.

Knowing How Credit Cards and Loans Work

It can be an important life lesson for older children to learn how credit cards work, and how interest and charges are calculated, and how they can mount up if the balance isn’t cleared each month.

When it comes to borrowing money, they need to know that there are many different types of loan available and that it’s important to understand how to compare charges and interest rates.

It’s also worth explaining to teenagers the value of having a good credit score and how this can improve their financial chances when the time comes to enter into big financial transactions like taking out their first mortgage.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

1 Cambridge University research for Money Advice Service, Habit formation and learning in young children, 2013

It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation, are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of investments can go down as well as up and you may not get back the full amount you invested.

The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.

Simply Put

Bulls and Bears

No one is quite sure where the oftenused stock market terms, bulls and bears, came from. Some say that it has to do with each animal’s basic characteristics. It may be because bulls use their horns to pitch their opponents up into the sky, while bears swipe down with their claws. Or it could be that bulls tend to charge ahead, while bears hibernate and prepare for a long winter.

A bull market

A bull market usually occurs when the economy is performing well, there are plenty of jobs around, businesses are prospering and the future outlook is bright. Selecting stocks in a bull market is relatively easy as stocks and shares prices are generally on the rise. So, if a person is optimistic about investments they are said to be ‘bullish’. However, bull markets eventually run out of steam.

A bear market

When the economy slows, business confidence ebbs and company profits dwindle, stock market prices tend to fall. This is termed a bear market, and someone who believes shares are going to fall is said to be ‘bearish’. Like bull markets, bear markets don’t last forever.

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