Measuring financial literacy of children aged 4 to 6 years: design and small-scale test

Results from the first phase of the study – a small-scale test of the use of comic strips – have now been delivered, showing that they may be an appropriate and viable tool for future studies into financial education.

We are exploring whether we can develop a measure of financial literacy for children under seven given their young age, and if we can, what that could look like, and if it could be used at scale across the UK.

We have a definition and a way of measurement for older children, aged over seven, via our Children and Young People’s Financial Capability survey. However, the measure isn’t appropriate for children under seven, either in terms of content or format. This leaves us with a measurement gap for children under seven. 

 Existing evidence shows children start to learn vital money skills and habits between three and seven years of age. We know experiences and learning about money when we’re young can have a direct impact on the ability to manage money later in life.

Loughborough University first conducted a review of previous research to determine a set of concepts and experiences to include in the financial literacy measure including identifying using a story-based approach to maximise engagement. A series of comic strips were designed in which a character – Arlo the alien – engages in experiences involving money, making it fun for the children. 

Loughborough University then conducted a small scale, experimental research project with children aged four to six years old to evaluate the instrument for usability and feasibility. Thirty-five children were interviewed – 20 in person in a primary school, five in person in a nursery, and ten by video call with a parent.

The comic strips were used as prompts for one-to-one interviews with children to assess their understanding of financial concepts and their ability to describe their own experiences with money in line with the set of concepts and experiences identified in the literature review. 

• Findings showed that the materials used to measure financial literacy were engaging and meaningful for children.
  
• The materials generated a distribution of scores that were developmentally appropriate.

The development of a measure of young children’s financial literacy could be used to provide a baseline of the current financial literacy of children aged under seven in the UK. It can also be used to assess the effectiveness of any interventions developed to improve financial literacy in this age group.  

This research supports the Money and Pensions Service Financial Foundations Agenda for Change of the UK Strategy for Financial Wellbeing, which has as its primary goal that two million more children and young people aged five to 17 should receive a meaningful financial education by 2030.

Further research will be carried out in 2022/23 to evaluate the instrument for validity and reliability with a larger and more diverse sample of participants. This will help us to see what approaches may be scalable for measurement at a UK wide representative level.