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Does Financial Education Work?

Now this might seem like a strange topic for me to be writing about given that Blue Tree is all about providing financial education, i.e. if the answer is ‘NO’ then I’ve been wasting my time.

The reason for bringing this up is that there are some studies that show that financial education makes no measurable impact on the financial health of the next generation. In fact, people within governments around the world (including some in the UK government) aren’t convinced financial education makes a difference and hence why finance still isn’t taught in a lot of schools around the world.

You’ll be surprised to hear that I don’t fully disagree with the outcome of these studies. In this blog, I’ll go through why just teaching kids about money isn’t going to make a big difference and, what needs to happen to make sure the next generation does in fact grow up financially healthy.

What’s going on here?

The reason I’m not surprised that financial education surveys haven’t shown a material increase in financial wellbeing, is that in most cases ‘financial education’ provided is pure ‘knowledge’ transfer. For example, ‘Today class, we are going to learn that inflation is the increase in price of things over time’.

Knowledge alone isn’t going to change the financial future of our kids. Just telling kids more about something doesn't always lead to different outcomes. For example, 99% of kids will know that eating donuts is bad for them but they still eat donuts (I still eat donuts!).

So, sitting down and telling kids that spending all their money is a bad idea, and that saving money is good, doesn’t work. We have the same desire to spend money as we do to eat the donut.

We have to do more than just provide Knowledge

The current financial education approach (in many cases) assumes that if we provide knowledge then it will lead to action (habits) and then kids will have a positive mindset towards money.

Whilst the theory sounds sensible, sadly it doesn't work.

Being great with money is about more than just knowledge. It’s about our habits, how we feel about ourselves, about what experiences we’ve had and so much more.

Do you remember learning about the environment when you were young?

I remember when I was at school, I was taught about the hole in the ozone layer and greenhouse gases due to pollution. I didn't then go home and start recycling everything and telling my parents they shouldn't drive their cars as much. In fact, I didn't take any action as I didn't link it to myself (I was no Greta). I also didn't see other people taking action so just carried on with my usual life. It wasn't until many years later when governments focused on making people take action that change started to happen (e.g. mandatory recycling).

Financial education (Knowledge) needs to be linked to Habits and Mindset

If I was going to judge the financial future of a class of students, I wouldn’t do a test to see who can explain ‘What is tax?’, I’d ask ‘Who here saves a bit of money every time they receive some?’. It’s the actions that they take which will determine their financial future.

One of the main reasons I encourage parents to get their kids to think of money like seeds is to help focus on the mindset they need to grow up to be financially healthy and wealthy. Using money as seeds and getting kids to see that if they plant (save) some seeds and help them grow (invest), they will have their own financial forest when they are older.

Why do they need a forest?

Those with a financial forest are the ones who go to bed without worrying about money as their forest is producing seeds whilst they sleep. They have more opportunities to travel, spend time with family and help others. Essentially, it is helping them decide if they want a RICH mindset (just use seeds to buy things) or a WEALTHY mindset (planting seeds to grow their forest). See my blog 'Rich Kids vs Wealthy Kids' for more on this topic.

How to grow their forest?

For our kids to grow their own forest, we need to train them to form habits which are aligned to the three rules of wealth:

  1. Keep one out of every ten seeds they receive (save before they spend)

  2. Plant the seeds you keep (invest their savings)

  3. Let your trees grow (be patient).

What knowledge to they need to help with these habits?

Financial education should be at school and at home

The reason I focus on helping parents teach their kids about money (rather than working with schools) is that parents can help their kids take action and form new habits. This is really hard for a school or text book or an explainer video to teach.

The other reason I focus on parents is that kids will want to connect the knowledge they

learn to the real world. For example, if we go back to the donut example. If they learn that donuts are unhealthy at school and then go home and their parents give them a donut, that would be very confusing and it's likely that the child will think ‘my parents probably got the same lesson at school but yet still eat donuts so it probably means it’s ok for me to eat donuts despite learning they are unhealthy’.

Don’t get me wrong, I’m not trying to stop your kids from eating donuts. Eating a donut is fine if your kids are also eating healthy foods and doing exercise. When it comes to money, it’s completely fine for kids to spend money as long as they are also saving and, spending money but to buy things they really want or need. Balance is the key and that needs to be taught.

Financial education needs to be repeated

Another key aspect is that financial education needs to be memorable and repeatable. As money is about mindset and habits, we need to make sure we don’t just give one lesson or test and expect a change. We need to find ways to talk about money regularly and make it fun, interactive and interesting.

There are some great charities who are working with schools to do this, such as RedStart and MyBnk in the UK.

You’ll know from my blogs, I use stories (or 'Fortune Fables' as I now call them) to help parents teach their kids about money. Stories have been shown to be easier to remember and repeated.

This is why I wrote my book, Grandpa’s Fortune Fables. The book helps kids learn about why they should save some of their money and why they should follow the three rules of wealth (as well as teaching them about topics ‘investing’, ‘debt’, ‘scams’ and ’tax) using stories.

One of the best moments for me is when I’m putting my kids to bed and they ask if I can tell them one of my Fortune Fables again. Although, telling them the ’Happy Farmer, Sad Farmer’ story for the hundredth time is getting a bit tiresome!

Stories are just one way to repeat important messages about money. There are other ways such as when you are out shopping or playing games such as Monopoly.


We should be TRAINING our kids to be GREAT WITH MONEY ... not just TEACHING them ABOUT MONEY!

If financial education (Knowledge) doesn’t lead to a change in Habits and Mindset then it is not likely to change the financial wellbeing of the next generation.

We need to make sure that we focus on using knowledge to change behaviour and habits.

Prioritise getting your kids to form money habits which are aligned to the three rules of wealth.


Thanks for reading!


P.S. Don't forget we have an online course to help you teach your kids about money. Check it out here


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