Glasgow, UK -- (SBWire) -- 09/25/2012 --The first report revealed that applicant numbers to English universities are down 8.8% compared with two years ago – around 37,000 fewer students[1].

Across the rest of the UK, the conditions facing young people are worrying. A poor graduate job market, higher debt levels and inflation means that careful management of personal finances is key for the next generation. With GCSE and A level results dropping through letter-boxes throughout England last month, university and further education costs are a hot topic. Official figures released in August by the Independent Commission on Fees show that English higher education establishments will now be able to charge students up to £9,000 per year[1] – which could add up to a maximum of £27,000 for a three year degree course. Many young people will be asking themselves: “Can I afford higher education?”

Scottish Friendly believes in thinking long term when it comes to navigating a tough financial climate. In this article, they have produced a guide which is divided into four key chapters in life with some helpful tips for teaching children of all ages important money skills that will help them get a good start in life. Like any good habit, teaching children to establish a positive pattern, saving and managing money early on should mean that this becomes second nature to them in adult life.

It is also important to remember that savings can be made on a child’s behalf throughout their childhood by using their tax-free savings allowance. Look out for products such as the Child Flexible Plan which allow you to invest £15 to £25 per month for a maximum of 18 years. Tax-free investments can also be made for children aged under 16 to give them something to build on when they start adult life (remember tax treatment depends on their individual circumstances and tax law may change in future).

2-5 years old

Imaginary play – Children revel in make believe and the simplest play can be turned into a basic lesson on how money works. Empty the penny jar and turn a cardboard box into a shop or ice cream parlour by cutting out a window and door. Put some pots and pans in and play at being a customer with children as the shopkeeper using pennies.

Counting – Language and numeracy are fundamental skills which are learnt from parents. So counting out loud even early on can familiarise a child with numbers. One idea to do with a toddler is to paint colourful dots on a sheet of paper and count them out loud together. This will encourage the child to vocalise numbers and set the foundations for an appreciation of numbers and counting.

Watch and learn – Allowing children to see their parents pay for things establishes the pattern of behaviour in their mind: “in order to get the shopping, mummy or daddy has to give some money”. Older children could even be allowed to participate in payments.

5-10 years old

Savings reward chart – A smart way of encouraging children to adopt a savings mentality. If they have a toy in mind, say the latest Lego space station or Nintendo DS game, cut a picture out of a magazine and draw a Blue Peter style “totaliser” to chart their money saved. Keep a jar close by and let them mark off the increments towards their goal by sticking stars on the chart. Be disciplined though, and make sure they don’t see the money saved as a sweet fund every day!

Jobs around the house – This helps children to form an understanding that work and being helpful can result in some pocket money, and it may even take the strain off parents on the cleaning front. Set 5 simple weekly tasks and decide how much each one will cost, then put the money in the savings jar mentioned above.

Wants versus needs – Parents should establish the difference with between want and need. Children may need a new school pencil case, but they probably want a new bike. Talking to them and explaining that sometimes it is better to put money into the thing they need, and that hard work will result in the things they want will be a useful lesson for later in life.

10 – 16 years old

This age group is critical because of the huge changes that take place in life that will establish how a child perceives, saves and spends money.

A current account – Many parents will feel the time is right to open a basic bank account for their child to give them some independence and lessons about managing money, security and saving. Parents can use this as an opportunity to explain how banking works.

Pocket money / a first job – A part time job in the holidays can be a great way to earn some money, gain some experience and meet new people. Whether it is mowing lawns, a paper round or cleaning cars.

Talk about goals – Children rapidly become young adults, and will begin considering goals such as a trip abroad, university, or a career. The earlier they can establish goals, the earlier a financial plan can be formed and the family can agree the amount of support they can offer to help them to achieve their goals. This summer young Olympians including Yohan Blake, Greg Rutherford and Laura Robson are great examples of how aiming for goals can lead to great things. It will have taken discipline, sacrifice and financial backing – but as the saying goes, “Anything in life worth having is worth working for.”

16 and Upward

University – At this stage in their lives, children face the big decision of whether to enter higher education in the pursuit of a degree or not. If children decide University is for them, sitting down to look at their savings and talk about a budget and how much the family can support them is a great way to encourage them to take a realistic view of the cost of living. Research funding help and the best available savings plan for them. The personal finance experts at The Daily Telegraph have just published an article on Student finance: how to manage your student finances, from bank accounts to online discounts, which makes for interesting reading.

ISAs – Children become eligible for standalone ISA investments on their 16th birthday. They could also invest between £15 and £25 a month as part of a Family Flexible Plan, which is run by Scottish Friendly for families in the UK. The purpose of the plan is to allow families to invest and beat the taxman together! The investment runs for 15 years but each family member’s policy has built in flexibility, allowing plans to be cashed in early if needed. This is over and above other tax-free allowances such as ISAs. Again, it is important to remember that tax treatment is dependent on individual circumstances and tax law may change in future. Also, if the plan value is accessed before 10 years, a tax charge may apply as well as a £50 deduction from the cash-in value.

These basic tips will hopefully come in handy when thinking about children’s finance. The key thing is to speak openly about saving and investing. Allow children the right amount of responsibility as they grow and make sure they develop a simple and regular savings habit that helps them towards their goal.

About Scottish Friendly
Scottish Friendly is a progressive and modern financial services group. The group provides investors and their families with a wide range of investment products.