Midweek Money: Bring them up as banking babies

Rachel Fixsen concludes our series on financial planning for young people, and finds that it's never too early to start

Flying the nest can be truly exhilarating. As long as you're armed with knowledge on how to manage practically, leaving home for the first time, and the new experiences that come with it, are something to look forward to. But getting knee-deep in credit card debt, or taken to court for unpaid bills, are experiences you can do without.

Many teenagers moving away to university are simply not aware of how to deal with their money, and are in danger of making mistakes. When, and how, should children learn about personal finance?

Schools could do more to help. The Personal Finance Education Group (PFEG), which includes financial companies, teachers, regulators and consumer groups, has been campaigning since December 1996 to get personal finance on to the National Curriculum.

Money matters should be integrated into subjects already taught, the group believes, rather than seen as a separate subject.

For example, 11-year-olds now being taught maths may be asked how many bricks they will need to build a house. Instead, PFEG would suggest a practical example: asking them how much money they would need to earn to pay off a loan taken out for a motorbike, including interest accrued over time.

The PFEG has worked out a "Learning Framework for Personal Finance", which gives examples of activities teachers can use to bring money management into existing subjects. The framework sets out learning objectives from age five to age 16, and is already being tried out in 20 schools.

Being a good consumer of personal finance is the same as being a good consumer of any product, says Victoria Nye, director of training and education at the Association of Unit Trusts and Investment Funds, one of the bodies involved in the PFEG.

"You need to have the assertiveness to ask questions of anyone who's trying to sell you something," says Ms Nye. "You need the in-built cynicism that we all get with a certain amount of maturity."

NatWest runs a programme in conjunction with schools that is aimed at teaching 11-to-18-year-olds practical financial literacy and giving them advice on money matters. Half of all secondary schools in England and Wales have now registered with the bank's "Face 2 Face With Finance" scheme.

Activities are set out under the programme, and bank employees visit the school. Teachers also have the opportunity to experience banks from the inside, by means of brief work placements.

There is a lot that parents can do, experts say. Simply being a role model by practising good money skills while your children are growing up gives them a good start. Make sure you pay all your bills on time, avoid buying too much on credit, and shop around for expensive items.

"It's good to be introduced to the discipline of saving at an early age," says Gavin Haynes, of the independent financial advisers Whitechurch Securities, in Bristol.

"Many of the major banks and building societies offer savings accounts with incentives that will interest children."

Abbey National offers its "Action Saver" account for children up to the age of 15, which pays 3.6 per cent interest on balances over pounds 1, and offers a gift pack and magazine as incentives. Halifax is targeting younger children with its "Little Xtra Club" for under-nines, which offers a range of free gifts. Club members could save their money in a Liquid Gold account, attracting 5.75 per cent gross annual interest from pounds 1.

Parents should think about teaching their children early on about personal finance, says Victoria Nye. "You can start very gently with a child from an early age, by giving them games to play, such as a basic shopping game, and as they get older you can build that up," she suggests.

If the children get money from grandparents, they could have the challenge of finding a good bank account for it themselves. Show them that there is a wealth of information in personal finance pages of newspapers, advises Ms Nye.

Build up an awareness of stock market investment, she says. If your child is interested in buying a certain CD player, for example, encourage them to notice which company manufactures them, and to ask whether that could be a good company to invest in.

Try tracking trading prices of a group of stocks with your children over the summer holidays, Ms Nye suggests; though she does add: "If they'd been investing over these summer holidays they'd have lost a fortune, probably."

New students can find themselves in deep water if they lack basic money- management skills.

"Some of the research we've done shows that 16-to-18-year-olds just aren't prepared - they don't understand how much they'll be paying for electricity bills, gas bills and council tax," says James Murray, of NatWest.

Parents should sit down with their children before they leave for university and tell them, for example, how the interest charges work if they get a credit card, and that if the bill is not paid in full on the date specified, charges will quickly begin to build up.

Learning how to budget is vital for new students, Mr Murray says.

And students-to-be should be told what to do if the worst happens and their finances do get out of control. "If you're at university and you start getting into money troubles, don't just hide the statements under the bed - go and see the bank manager," says Mr Murray.