Teachers earn £200k, and money comes from fairies

A pint of milk costs £5, teachers earn more than £200,000, and money comes from fairies - or genies. These bizarre statements are actually the genuine views expressed in a study of 7-12 year-olds, when they were asked how they felt about money. It's simultaneously hilarious and terrifying.

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See also: 15 easy ways to teach kids about money

The study, by pensions advice firm Portafina, found that 40% of children think their teacher earns more than £200,000, while a third of children think that a weekly shop for two people costs less than £10 - presumably they are only buying sweets.

More than a fifth of the kids polled thought that money was 'free' or 'comes from a tree' or even 'from heaven'. One 10-year-old from Edinburgh suggested that money was delivered 'by magic fairies', whilst an 11-year-old from Manchester believed money was gifted by 'a genie'.

Those children who understood that money is earned from work were consistently overly optimistic about income expectations. They were also wildly off-target when it came to costs, with a quarter (25%) believing that a weekly shop for two people costs as little as £10, yet a pint of milk is £5.

When asked about what makes something valuable, the responses varied between, 'if it's rare', 'if it's big', 'if it glitters', and even 'if Grandma has it'. Some of the kids felt that an item's value depended on how happy it made them feel, or how fun they thought it was.

When it came to pensions and retirement, they were even more baffled. One 10-year-old from Sheffield suggested a pension was something that would allow 'Grandad to go to the pub' and a 7-year old from Leeds felt it was something 'that the Queen has' in order to 'buy jewels'.

Why worry?

These answers are pretty funny - kids (it turns out) do indeed say the funniest things. But when you're smirking at the children who think money is delivered by magic fairies (presumably relatives of the tooth fairy), it's worth bearing in mind that there's another, less amusing, side to these findings.

Many of these children are clearly severely lacking in understanding about money - and yet they are aged between 7 and 12. In just four years some of these kids will be moving out of home and trying to fend for themselves. We can only hope that by then they'll have cleared up the whole issue of where money comes from.

By the age of 12, a combination of school and information from their parents should surely have equipped these children with a better understanding of money. Jamie Smith-Thompson, managing director at Portafina, said: "Money management is confusing and challenging for the average adult, so it's no surprise that this is the case with children too.

"We're big believers in encouraging kids to understand money from an early age – many of us here at Portafina are parents, and we're undertaking this challenge! It makes sense that being open with children about value and wealth, and explaining basic terms, is sure to set them on the right path for the future, and you can teach them slowly, without stripping the innocence and joy from childhood. You can even make it into a game."

"We speak to adults every day who are so incredibly confused by pensions and savings that they've buried their heads in the sand for years, and may now face a financially challenging retirement due to lack of preparation. What this study has reinforced is that basic financial education is more important now than ever. It gives our children their best chance to create the fantastic future lifestyle we all want them to have."

What can you do?

You don't need to become a fully-fledged financial teacher. There are seven really simple things any parent can do to introduce their children to money.

1. Take them to the supermarket - and engage them at the till. They should at least see what you are spending, and if you are paying in cash, they can hand the money over and get your change.

2. Send them to the shop - there are all sorts of concerns about letting children pop to the corner shop, but any parent can walk them to the door, hand over a couple of quid, and get them to buy a pint of milk on their own.

3. Give them pocket money - from an early age they can start making decisions about what to spend their money on.

4. Graduate to an allowance - by the time they are 12 they ought to have a monthly allowance, so they understand about setting a budget for things like entertainment and new clothes, and appreciate the consequences if they blow the lot unwisely on day one.

5. Say no - we all want our kids to be happy, but they have to appreciate that they cannot have everything they wish for if it's beyond the budget

6. Don't bail them out - it's tempting to pick up the pieces when they don't have any pocket money for the latest must-have toy, or they blow their allowance and miss out on a trip 'everyone else' is going on, but this is exactly how we learn the difficult lessons of managing our money.

7. Have some surprise savings - if you can afford to put something away when they are really small, you can save or invest a lump sum for ten years or longer. When they want a car or a computer in their late teens, you can simultaneously show them the merits of saving, and fund a car purchase without breaking the bank.