The Children’s Society’s Good Childhood Report 2013 revealed declining levels of well-being amongst British children, with unhappiness particularly pronounced amongst teenagers. Finances were identified as a key factor.
Not long after, the Child Poverty Action Group (CPAG) published a study asserting that the cost of raising a child to the age of 18 had risen to almost £150,000, far outstripping wage and benefit increases. At a time when 52% of Britons are ‘on the edge financially’, how can anyone afford to raise a happy child?
What makes a happy child? The Children’s Society report identifies family, choice and finances as the biggest factors in low well-being of children – and therefore high well-being by equivalence. Key statistics from the report are:
- Children who said that their family does not ‘get along well together’ were eight times more likely to have low well-being.
- Children who said that they do not ‘feel free to express their ideas and opinions’ were six times more likely to have low well-being.
- Children who report having ‘a lot less money than their friends’ were three times more likely to have low well-being.
At first glance, money may seem the least important factor. However, material deprivation played a significant role in all elements of well-being, as shown in this striking graph.
Children who had experienced deprivation showed significantly lower well-being in all aspects surveyed. Materially deprived children were thirteen times more likely to disagree that ‘I feel safe at home’, nine times more likely to disagree that ‘overall I have a lot to be proud of’, six times more likely to disagree that ‘I have enough choice about how I spend my time’ and four times more likely to say that their health is bad or very bad.
Material deprivation in this context is defined according to the Children’s Society’s own index of ten key possessions. The majority of children have all or nine items on the index, deprived children – as described in the graph – have five or less.
The cost of raising a child
The importance of money to the well-being of children, and teenagers in particular, comes as sobering reading at a time when the minimum cost of raising a child has outstripped wage and benefit increases. CPAG puts the total at £148,105 to raise a child to the age of 18 for two parents and £161,260 for a lone parent. These figures represent an increase of 4% over last year, compared with a 1% rise in benefits, 1.8% in minimum wage, and 1.5% in average earnings.
Education is the highest cost, with childcare and babysitting next in the list. Early years (1 to 4) and young adulthood (18 to 21) are the most expensive periods, costing £14,140 per year and £17,459 per year respectively.
The need to save
These figures may seem daunting, and rightly so. Faced with these numbers it would be very easy to give up on the idea of raising a child at all, let alone a happy one.
In our personal debt culture it may come as a shock, but the key has to be savings. The Children’s Society report found that the influence of material deprivation on well-being was mostly not related to household income, which represents only a 2% variation. Rather, material influence on well-being is based on tangible monetary signifiers – having pocket money, some money to save, similar clothes to friends, a family holiday, a family car. All things that depend either on the child having their own money, or on careful saving for lump sums.
When put in the context of stagnating wages, the need for effective money management – with savings at the heart of it – is even more pronounced, particularly when the most expensive (and critical for well-being) child-rearing years are at the end. Financial prudence on the part of parents is crucial to a happy childhood.
The good news is that the longer you put money away for, the more interest it will yield. Saving for your child’s future is quite possibly the most efficient personal use of money in the current low-interest, high-inflation environment.
A financial education
Raising a happy child isn’t just about providing for them financially. Putting aside family issues, the report highlighted choice and autonomy as two of the biggest factors in childhood happiness, much as they are for adults.
Common sense alone dictates that allowing children, particularly teenagers, to manage some of their own money will go a long way to achieving choice and autonomy. Participating with friends when out independently, buying the latest trainers, iPod – money management is an important part of fitting in. But it’s also integral to lasting happiness once they reach adulthood. Up to a point, higher levels of well-being do correspond to greater wealth. With less additional happiness from every pound earned, the implication is that it’s down to financial security rather than affording luxuries. Financial education isn’t about learning to make the most money; it’s about learning to efficiently manage what you’ve got.
Although financial awareness will be on the National Curriculum from next year, children really learn money management from their parents, particularly by example. Openly discuss money with your children from an early age. Discuss paying for things on credit card. Talk about tax. Be seen to save money. Use the resources provided by financial education charity Pfeg.
A solid financial education will improve well-being in childhood and help carry the same positive effects well into adulthood. Teach enough money management to a child, and you may be lucky enough to escape being parent to one of the 1.7 million ‘boomerang kids’ currently in the UK. At the very least you’ll cap your child-rearing costs at 21, rather than paying out until their 30s.
The cost of a happy child? £218,024, financial prudence and teaching your children the same. Best start saving now.