A survey of 500 British children aged between seven and 11, commissioned by Norwich Union has revealed that four out of five of our youngsters have no idea how much money it costs to purchase possessions such as houses, cars and holidays.
While most children thought the average house price was around £100,000, a mere one in five (21%) correctly estimated that a house bought on today’s market would actually cost £214,222.
And while one in ten thought they would only need to fork out £1000, a further two percent would pay more than £1 million for a three-bedroom pad.
When it comes to the annual earnings of their parents, the children’s responses varied considerably from 10% correctly identifying the national UK average salary as being between £20K-30K though just under quarter believed that the average yearly pay packet is around £15,000 and a further 11% would be happy to receive less than £5,000. Interestingly, most respondents happily stated that their parents earn ‘more than a million’.
Simon Quick, director of marketing for Norwich Union, comments: "It's fascinating to see the financial world through the eyes of children and look at their attitudes towards money. Our research showed that most of the 7-11 year-olds had some level of economic knowledge through receiving pocket money and saving in a money box or bank account.
"However, the survey also highlights the need for more to be done to educate children about financial planning. As things stand, many look set for quite a surprise when they start paying their own way!"
It appears that it is never too late to start children off on the right footing when it comes to financial planning as 75% of the respondents already have some income, with a quarter receiving between £2.50 and £5 a week and some even ‘earn’ £25 or more every week.
We could also consider taking a leaf out of our American counterpart’s book where classes on personal finance and budgeting in schools are commonplace in a number of states.
Children learn the basic finance skills including budgeting, credit management, balancing cheque books, compound interest and other investment principles.
A longitudinal study carried out last year in America by the Institute of Public Policy Research revealed that such classes could make children richer by up to £32,000 between the ages of 35-49.
Miranda Lewis, a senior research fellow at the Institute of Public Policy Research comments:
“It pays to get clued up. Lessons that teach young people the basics of personal finance, like how to calculate interest, household budgeting and understanding mortgages, can help them make the right financial decisions later in life and avoid debt problems.
"The evidence from America shows that financial education can pay real dividends with some people being better off by up £32,000.”
Learn more about child savings accounts