Do emotionally intelligent kids grow up to become more financially savvy?
“ Emotional intelligence begins to develop in the earliest years. All the small exchanges children have with their parents, teachers, and with each other carry emotional messages”- Daniel Goleman
Emotional intelligence and attitudes towards money are developed at a young age. In fact, research has shown that the behaviour we exhibit as adults are learnt from an early age as children observe the environments to which they are exposed. Parents and carers have the most crucial influence and impact on how kids deal with money when they are adults.
Organisations and educational establishments also have a vital role in helping to shape children’s financial outlook by raising awareness and providing financial education to young people such as children. Therefore, organisations sometimes collaborate to try and combat some of the challenges faced in the 21st century, such as financial exclusion.
According to research, it has been found that many of the attitudes toward money are formed by age seven, therefore talking to young children from a young age is crucial to building their financial resilience young as this can help them to develop positive behaviours that could impact them throughout their lifetime.
In addition, the Covid-19 pandemic showed just how important it is to be financially prepared for eventualities by having savings, as many people in the UK have little to no savings. According to the independent, approximately one in five (19%) adults have less than £100 of savings deposited in their accounts, based on building society findings. This shows an increasing gap in the UK’s financial well-being.
However, during the pandemic (20%), people were able to increase their monthly savings pot; this research was undertaken for the Yorkshire Building society, whose aim is to increase the number of people saving. The building society also found that 21% of people were not saving, compared to 12% in 2019 when a similar study was done.
In addition, one in seven (13%) have no savings they could rely on if the unforeseen happened, and more than a quarter (26%) have less than £500 in savings.
The pandemic also meant that children had fallen behind in their education. Furthermore, educational establishments do not always have the resources to teach children financial education; therefore, allocating time after they finish school or on the weekends to educate children on managing finances is crucial.
Studies have also shown a significant link between money and overall well-being, as those prone to debt struggle more with mental health. MyBnk has closely examined the association between money and young people’s mental health.
A study of 3,700 young participants aged 11-25 was conducted by Mybnk. The study revealed that females were less financially confident and had more financial-related worries impacting their mental health than male participants. However, this changes after an intervention occurs as the gap closes and females surpass the capabilities of males.
How to teach a child to be financially savvy?
Do quizzes and games around financial management
Create quizzes/games for your child, such as a Needs vs wants quiz or game where they have to say what they think is a want or need and why. And then, you can use these games to educate them by correcting their answers and explaining why something is right or wrong.
Give children an allowance
Introduce an allowance system where children save within a budget to manage their money in a way that makes it last until their next allowance. This will teach them the importance of budgeting so that they have enough until they make it until they receive their subsequent payment.
Use piggy banks
Go piggy banking shopping with your child, let them choose the piggy bank, and encourage them to use it to save towards their goal. You could also buy more than one piggy bank if your child has more than one goal they would like to save for though this is more cost-effective if you have one-two children and can give them an allowance which they can divide between more than one piggy bank
Get your children to save towards a goal
Saving towards a goal from a young age is essential as it can help instil the value of saving from childhood, and at the same time, children get to experience what it is like to enjoy the rewards of their saving. For more minor children, saving towards a short-term goal such as a toy is recommended.
Have Financial sessions with your child
Schedule some time once a week to teach your child about managing money and setting them a goal. The financial sessions can also be used to review their progress.
Offer saving incentives
To encourage saving, if your child has set a goal that would require you to put money on top, you can encourage them to save as much as they can by a specific date and then tell them that you will put the remaining amount on top if you can so that they can get the new console or football kit they have had their eyes on.
Intellisaving is an innovative saving app that facilitates managing finances by integrating multiple savings and ISA accounts easily. Cash ISA is one of the main ISA accounts that can be integrated into the Intellisaving platform. Intellisaving supports banks and financial institutes of every size. They also have a feature that allows users to compare their current interest rates with the interest rates offered by other banking providers to access the best savings rates on the app and website.
There are also plenty of other features waiting to be discovered on the app, which can be downloaded on Google play or Playstore.
Intellisaving believes that it is essential to manage finances efficiently no matter what life stage a person is in, as learning the importance of good financial management is valuable at any age.
Research conducted through different sources has indicated that a child does not just become emotionally intelligent; it can depend on various factors, such as the upbringing of the child and the habits and values instilled in them from a young age. The same conclusion can be drawn from sources when it comes to being financially savvy; they need to be taught how to be financially knowledgeable, which is why many websites give advice on raising an emotionally intelligent kid and teaching children to be financially savvy.
Kids tend to follow in their parent’s or guardians’ footsteps, and if they see that their parent’s or carers’ behavioural patterns with money are negative, they can grow up to have the same harmful behaviours with money which can lead to challenges in the future such as debt or mental health exacerbated by money-related concerns.
Therefore, as mentioned earlier, it is crucial to make children aware of how important it is to manage money effectively and save money. Otherwise, they could grow up to join the high number of people in the UK who have little to no savings.