For all the inevitable speculation about how the upcoming Budget could affect retirees or first-time buyers, there is one group that may well get overlooked: children.
Attention will of course be given to families, particularly when it comes to matters such as Working Tax Credits, Child Benefit and Tax-Free Childcare. Important as these measures unquestionably are, should we not be looking at children specifically, when considering the impact the Budget could have? Or, to put it another way, what would a child-friendly Budget look like?
In my view, Chancellor Phillip Hammond has a great opportunity on Wednesday, when he lays out his spending plans for the year, to help solidify the important work the Government, and individual families, have been doing to teach children about their finances. Taking a longer term view when setting the Budget could have a dramatic effect in increasing the life chances of young people.
It might sound counter-intuitive, but we could start by following the example set by pensions. The noted economist Richard Thaler, as part of his 'nudge theory', argued that younger people aren't naturally inclined to start saving for their pensions, despite it being in their long-term interests, and so needed a slight nudge. As a result, the Government introduced automatic enrolment for pensions, which sees all employees automatically contribute a portion of their earnings, matched by employers, to their pension pots. Employees can opt out, but they have to make a conscious decision to do so.
But how could this apply to young children, many of whom are years away from receiving their first pay cheque? One option is to look at reviving 'child trusts', or updating the 'junior ISAs' that replaced them. Using auto-enrolment for parents to set aside a small portion of their earnings each month, which could be boosted with matched contributions from the Government, would help encourage more parents to save for their children's future. When a child reaches eighteen, they could be given the opportunity to access the money specifically to fund further education or as a deposit towards a home, or even to use it to tax efficiently kick-start their pension pots.
With a little 'nudge', not only could we help children learn the benefits of long-term saving, but we would be safeguarding their future financial interests, too.
When it comes to teaching the value of saving, we don't need to stop there. In outlining next year's education budget, the Government could introduce targeted support for financial literacy, which is already part of the national curriculum, by funding specialists to go into schools to teach kids how to spend and save. Fun, hands-on lessons by expert external speakers could be a great way of imparting financial wisdom to young people. Helping to free up teachers' time, many of whom are already struggling with hectic timetables, would be an added bonus. Ring-fenced financial support worked well with promoting the healthy eating agenda in schools - another initiative focused on long-term benefits for young people.
Learning how to save and spend effectively is intrinsically linked to working and earning from a young age. To encourage this, the Government could consider scrapping employee and employer national insurance contributions specifically for under-18s, or, instead, using them to boost contributions to the renewed child trusts suggested above. This could incentivise the recruitment of under-18s, and encourage more young people to seek work.
With this in mind, the Government should also consider extending apprenticeships. Teaching young people a skill directly relevant to the workplace, whilst enabling them to earn an income, is a superb way of imparting key life lessons to the younger generations. What's more, it would fulfil the dual purpose of equipping the UK with the skilled workforce it needs.
Inevitably, there are many pressures on the public purse that the Government needs to try and satisfy. Nonetheless, the Budget represents a great opportunity not only to improve the financial position of young people in the short term, but to help them blossom into financially competent, financially confident adults. Hammond is faced with a great opportunity, but will he take it?