Study finds wide gap in financial skills of disadvantaged children


The financial skills of 15-year-olds from socio-economically disadvantaged backgrounds are similar to those of 11-year-olds from more advantaged backgrounds, shows a new report from UCL researchers.

The study, commissioned and funded by St James’s Place, the UK’s largest provider of financial advice, measured the financial capabilities and behavior of 3,745 Britons aged 7-17 across a series of finance-related questions, including interest rates, inflation, spending, savings and taxes. The participants were all part of the UK Financial Capability of Children and Young People Survey.*

The researchers then converted their answers into an overall score to compare the average percentile ranking of children from advantaged and disadvantaged socioeconomic backgrounds. On this scale, 100 represented the top 1% of children in terms of financial literacy and 1 represented the bottom 1% of children.

It is deeply concerning that there seems to be a significant gap in the financial knowledge of disadvantaged children that seems to emerge when they are young.


Our study shows that the financial skills of disadvantaged children who are about to leave secondary school are similar to those of children from privileged backgrounds who have just entered secondary school.


For example, at age 17, there is a difference between socioeconomic groups – on average – of about 14 places in the financial literacy ranking (low socioeconomic status (SES) = 55th percentile vs. high SES 69th percentile) . We also see that this gap is similar at age 13, indicating that the root causes of these inequalities in young people’s financial skills set in before children enter secondary school. »


John Jerrim, lead author, professor, UCL Institute for Social Research

As part of the study, young people were also asked about their knowledge of how interest rates work. About one in three (33%) of 11-17 year olds from families with low socio-economic status could not calculate the amount of money they would have in their savings account with an interest rate of 2% . This is compared to only 14% of children from wealthy families.

The researchers also studied how parents talked to their children about finances and money. They found that, in general, socioeconomic differences in the informal types of financial education provided by parents were relatively small, and that most parents recognize the importance of teaching their children about money, regardless of or their socio-economic background. They did, however, notice a difference in parents’ confidence in being able to effectively teach their children about money.

More affluent parents tend to be more confident that they can teach their child how to manage money than less affluent parents (65% vs. 52%) and say they will be able to influence how their child will behave with money in time. long-term (46% versus 37%) than disadvantaged parents.

When researchers looked at differences in financial skills taught in school, there were large socioeconomic gaps. For example, children from higher socio-economic backgrounds were much more likely to report being taught skills such as calculating change for shopping (67% versus 54%), saving money (43% versus 28%) and the difference between the things you “need” and “want” to buy (36% vs. 27%) than their disadvantaged peers.

The authors also found that only a small proportion of elementary school children learned some truly essential financial skills in school. For example, even among families with higher socioeconomic status, only about one in five elementary school children learn about bank accounts, how to track their spending and savings, and how to spot advertisements that try to sell them something.

The authors say more research is needed given that previous work has shown that the UK has low levels of financial literacy by international standards, particularly among people from lower socio-economic groups. They also say that the estimates only provide evidence for conditional associations and are unable to establish cause and effect.

Professor Jerrim added: “Given that young people from lower socio-economic backgrounds are, unfortunately, more likely to struggle financially as adults and become trapped in a cycle of poverty and debt, much more needs to be done to improve disadvantaged young people’s understanding of money and how it works.”

Vicki Foster, Director of Responsible Business at SJP, “Money habits are formed at an early age and the lessons we learn as children carry over into adulthood. The quality of conversations during these years training is therefore crucial to ensure that good habits are passed on to the future.In the age of information, it is worrying that so many children still do not have access to sufficient financial education and that the he impact of this situation affects those from disadvantaged backgrounds the most.

“At SJP, we have the ambition to improve financial well-being through education and support. Through classroom workshops, we have already reached thousands of children and young people with educational programs, while the funding and resources provided by our Charitable Foundation help make a difference in this space.

“Parents, teachers and responsible businesses can all play a role in helping to close the growing financial literacy gap. This UCL study has shed light on a significant problem, the solution to which is complex but not insurmountable with a collective effort.”

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