She wouldn’t budge from the playground. Then the little girl’s aunt had an idea. She grabbed Tilly’s purse when she wasn’t looking and ran off with it. She’d only get her purse back if she came with us, Tilly was told. That did the trick. Tilly didn’t know how much money she’d lost, still less what it would buy her, but it was her money and she valued it for its own sake. She was starting her life-long relationship with money.
It’s a relationship that becomes richer and more complex quite quickly.
When I was at junior school, my sister and I had savings accounts at the local building society. Occasionally, we would go in to deposit a pound in our accounts and come out proudly with our updated passbooks. One year, the building society held a competition to create a piece of art depicting their office, a Victorian villa situated on the roundabout just off the high street of the little town where we lived.
My entry was a collage. I made the walls of the building from pale yellow hessian. I cut out pieces of paper to look like people and placed them so that they were leaning out of the upstairs windows waving their passbooks. Looking back, I’ve no doubt it was these cut-out people who helped me to win the competition. But it was not because my artistic efforts so delighted the judges – one of whom was the building society manager. More likely it was down to my massive overestimation of interest rates.
I’d filled in the little cardboard passbooks held by my paper people with figures such as: ‘Deposit: £600, Interest: £300. Balance: £900’. Admittedly interest rates were running high in those days, but definitely not that high! Still, it showed that even as a little girl I had some understanding of how money works, even if I was sketchy on the detail. I’d already been introduced to the concepts of saving, interest, deposits and balances. I knew that money wasn’t just a matter of handing over a certain number of coins in order to get a certain number of sweets.
One study I particularly like about our early grasp of money involves a group of six-year-olds in a Finnish nursery school. It’s 2008, and they sit on a carpet to create their own theatrical production. Adult producers are there to help them, but the point is for the children to make as many decisions about the play as possible – everything from the set design to the plot and the wording of the script.
After some discussion, they invent a story they call ‘Six Million Lions’. They select parts for themselves, with one boy insisting that he would play a table made from potatoes, a role that sounds as though it would stretch most actors, but which – in the spirit of self-determinism – is permitted. The whole idea of this project is for the children to be in control. The adults don’t mention money, but that doesn’t stop the children.
Marleena Stolp from the University of Jyväskylä in Finland spent six weeks watching the theatre production, recording the children’s conversations and then analysing them.12 She soon found one topic that predominated – money. The children knew they were creating something with a market value; they discussed ticket prices and the possibility of filming the performance in order to sell the DVD in shops. They were only six years old, but far from viewing the play as simply an entertaining experience, they were already thinking about how to market and monetise it. There was no doubt that they loved the idea of making money. They even discussed how to select a ticket price that people would be prepared to pay, well aware that the market would not allow them to overcharge and that they risked having no paying audience if they did.
So these children already had some comprehension of money, pricing and the idea of the market. Where does this understanding of the value of money come from?
SAVING FOR A LUTE
In a study conducted in Hong Kong, a group of five- and six-year-olds were given the word ‘money’ and asked to free associate. They had plenty to say on the subject. Not surprisingly, they mainly associated it with the ability to buy things they wanted (similar studies in the US and Europe have found the same). They didn’t tend to have views on the virtue or otherwise of money.
Which is not the case with adults. When the same researchers gave adults questionnaires about whether money was good or bad, different groups took different stances. Students in particular had negative views about it. They believed it to be less good, less interesting and, strikingly, less powerful than business people did.13 By contrast the young children hadn’t developed ethical positions on money. It was just there, and they knew it was something desirable and useful, something you wanted to have, ready to spend. The notion of saving is something children learn about and appreciate even when they’re quite little. That said, before going to school, when children do save, the main motivation is usually the pleasure of collecting money, piling it up and counting it. It’s only as children get a bit older that they begin to save for a particular item they want to buy.
In my case, the cherished item was, rather bizarrely, a lute. I’d seen one at a craft fair at Hatfield House, the Tudor mansion in Hertfordshire where Elizabeth I was supposedly sitting under an oak tree in 1558 when she was given the news that she was to become queen. More than half a millennium later I became determined to save up enough to buy a lute. In order to track my progress, I carefully drew one of those fundraising thermometers. I also opened a special savings account at my favorite building society. I was extraordinarily, and rather sweetly, tenacious about my saving. After five years I had accumulated £187. Which was a good effort, but not nearly enough loot to buy a lute. The one I had my eye on cost £1,400.
Still, if I hadn’t been so set on the unobtainable lute I might never have saved that much. By the end of the five years, I was at the age where children realise that saving is useful more generally. Money doesn’t just have to be earmarked for a particular purchase. It represents choice. It’s worth having even when you’re not sure what you want to buy with it. Some time in the future you’ll want or need something, and if you have savings you might be able to afford that something.
Sadly, I rather frittered my lute money away. Having grown out of my Elizabethan phase, I spent my savings on records by Billy Idol, The Sisters of Mercy and U2. (Though, thinking about it, vinyl of that vintage might not be such a bad investment after all.)
This illustrates how hard it is to define ‘good’ saving among children. You could measure their saving as a proportion of any money they have received over a certain period of time, whether that’s regular pocket money or birthday money from their grandparents. But is saving up some of that money for several months or years and then buying an expensive toy really worthy of praise? If an adult did something similar – a fifty-year-old man spending all his savings on a pricey motorbike, for example – we might see him as extravagant. He might have saved up for some time, but then he blew the cash all in one go.
But then is it really better to save a little less for shorter periods and to spend that money on, say, books? If you really like books, this sort of saving is really just another form of indulgence. And what of saving a large sum with no great object in mind? It might seem responsible. You never know when you might need the money. But in an adult, such saving might seem stingy or even miserly.
Taking everything into account, adults generally applaud the regular saving of a proportion of income. We need to save in order to afford a deposit on a home. It’s a form of insurance for spells of unemployment or a bout of illness. And of course, we have to think about retirement. I’ll come back to how adults can trick themselves into saving more in Chapter 13. But children struggle with the concept of a ‘rainy day’ – the umbrella in these situations is provided by their parents, their very own ‘nanny state’. And the self-restraint that saving requires is a real trial for children who live much more in the moment.
This was nicely demonstrated in a study that created a so-called ‘play economy’. 14 Each child was told that to start them off they had an imaginary bank account
