Literature Review: The impact of digital money on children and young people’s financial education

The aim of the review was to better understand:

• how children and young people learn about money in a digital age and what the implications are for their financial education 
• what interventions exist that seek to improve children and young people’s digital financial literacy
• where are there gaps in our existing knowledge.

Our Children and Young People’s Financial Wellbeing Survey 2022 told us that there has been an increase in digital financial transactions among children and young people. This shift starts quite young and affects the whole family. More young people than ever are receiving pocket money digitally and using debit cards to pay for things online. 

A greater understanding of how this digitisation of finances impacts how children and young people learn about money can be used to inform the design of effective financial education interventions that include improving their digital financial literacy. 

 The evidence review highlighted ten themes, drawn from the existing literature: 

1. Digitisation of financial transactions in recent years has profound implications for children and young people’s financial education. 
   
2. Evidence exists for children and young people’s engagement in online economic activities, for example, receiving pocket money virtually, spending money on gaming. However, there is a scarcity of literature on how this digitisation impacts their learning about money.
3. The shift towards increased digital financial transactions starts young. The review showed that while fewer 11-year-olds are receiving pocket money in cash than 7-year-olds, the impact is most pronounced amongst teenagers aged 16-17, who largely receive money digitally.
4. There is a lack of consensus around what constitutes effective digital financial literacy interventions, which leads to challenges such as inconsistencies in education content and difficulties assessing effectiveness of interventions.  
5. There is limited evidence around the effectiveness of any digital financial literacy interventions; rigorous evaluation and a greater focus on practical real-world skills is needed. 
6. There are benefits of digital money for children and young people, for example greater financial inclusion, new earning opportunities, enhanced financial management. 
7. There are also risks for children and young people, e.g. impulse buying, online fraud, cyber security threats, normalisation of financial risk-taking behaviours through gaming and online ‘kidpreneurship’. 
8. There has been a shift towards children and young people consuming more information online, but they are not always being able to discern between real and fake news or ensure quality of content. 
9. Some young people have a perception of virtual money as tangible and effective for financial management, viewing physical cash as outdated, but more research is needed. 
10.  Digital games having pay-reward systems (‘gamblification’ of gaming) can cause financial and emotional harm, and a dissociation of in-game expenses and real-world monetary value can cause confusion. 

We have identified the following gaps in the evidence:

1. There is a need for a common definition and measures of digital financial literacy.
2. A deeper understanding of the fintech and the digital financial services landscape for children and young people is required, including the benefits and risks associated with emerging technologies such as digital currencies and blockchain. 
3. More comprehensive research is needed on a) children and young people's online financial behaviours, knowledge, and attitudes, and b) how these online actions shape their overall understanding of and attitudes toward money and financial behaviour. This should include how the financial socialisation and education at home is changing through digitalisation. 
4. More evidence is needed to understand the medium to long-term impact of digital financial interventions – particularly looking at impact on behaviour as well as knowledge and attitudes. 

We hope these findings will be useful for: 

• policymakers working on financial education and other activity that supports children and young people’s financial capability
• any organisations developing or delivering interventions aimed at improving children and young people’s financial capability, especially their digital financial literacy
• funders or other stakeholders concerned with the financial education and digital financial literacy of children and young people.  

The Children and Young People’s Financial Wellbeing Survey 2022 survey was carried out amongst 4,740 children and young people using a mixed methodology approach. The data collection period occurred between 18th August 2022 and 6th November 2022. 

Weighting has been employed to ensure the overall reported population is representative of all young people aged seven to 17 in the UK. The nations with devolved governments (Northern Ireland, Scotland and Wales) were over-sampled to allow robust, separate analysis.