Young children do not learn important lessons unless they are properly taught to them. They need to learn how to manage money from a young age. With the world’s dynamics changing at such a rapid pace, financial literacy for young children is becoming an increasingly important aspect of life. Teenagers are always eager to live a luxurious lifestyle on their earnings, and they are eager to stand on their own two feet and use their money to do so.
Financial literacy for children includes not only spending money wisely but also the practice of saving or investing.
What is Financial Literacy?
In layman’s terms, financial literacy is the ability to manage money. This includes understanding lending, borrowing, saving, and investing, as well as the skills required to plan your monthly and long-term finances. Even if we do not study investments or savings, we cannot deny that earning and spending play a significant role in our daily lives. From monthly budgeting to day-to-day purchases and tax payments, financial activities are an important life skill that everyone should have.
Also read, Tips for students to become self-reliant
Benefits of Teaching Financial Literacy to Children
Teaching financial literacy to children at a young age has several advantages, including:
- Your children will understand the value of money and will start to demand less. Explaining the prices of various items to children will help them gradually determine what is and isn’t expensive in society.
- Once they understand the value of things, they will be much more appreciative when they are given a gift or something unexpectedly.
- By learning about financial risks, children will be better prepared to avoid financial debt and bankruptcy in the future.
- They may be more likely to plan for future events, such as saving for a vacation, investing in real estate, or even putting money aside for retirement.
- They will live happier, less stressful lives – this benefit is often overlooked, but should be heavily emphasised when considering the long-term consequences of teaching financial literacy.
Make use of this session conducted on financial literacy, specially for students, youth and women, by TIST.
How to Teach Children Financial Literacy at Home
Make use of these activities to develop financial literacy among children.
1. Demonstrate the significance of saving
Demonstrate the value of saving to children by having them save a portion of their allowance each month to purchase something they desire. Teach them the value of frugality and the dangers of impulsive spending, as well as the fact that any kind of debt is a bad idea. This will assist them in comprehending the implications of utilising credit cards and easy money.
2. Make them earn their allowance
One of the most important lessons you can teach your children, regardless of their age, is that money is a limited resource. When they have to work for their money, as you most likely do, they will learn to be more careful with it.
Many parents provide their children with a weekly allowance, which can help teach them budgeting skills. Making them earn money by doing chores would be even better. Making the mental link between income and personal effort will pay huge dividends when they grow up and fly the coop.
3. Encourage your child to work part-time
Encourage your children to work part-time so that they will value not only their money but also the time it takes to earn it. If they are too young to legally begin working, provide a monetary incentive for chores such as washing the car or vacuuming the house.
4. Teach them how to keep track of their expenditure
Emphasizing the importance of keeping track of one’s spending, and having children keep a weekly account of where they spend their money, tabulating it at the end of the month, will undoubtedly be an eye-opening experience for them. Knowing where your money is going is an important part of becoming a better saver. Encourage children to consider how they spend their money and how much faster they could reach their savings goal if they changed their spending habits.
5. Make it a game
Who said financial education had to be dull? Even board games can teach children the value of being frugal. Payday is one of the best games for teaching kids important money management skills. With the next paycheck coming in a month, players must make their money last. They can buy items they believe will make them money and even take out loans, but getting in over one’s head can cause problems, especially if there are other bills to pay. Does this sound familiar?
Even Monopoly can teach important lessons, with players deciding which properties or buying strategies will yield the highest payoffs and weighing risk versus reward with each move.
6. Discuss money directly
Financial crises teach us about money management and how to spend it wisely. Teenagers must be financially literate in order to use their hard-earned money wisely and to be aware of money matters. Money is central to our daily lives; we spend it not only on education, but also on what we eat, the clothes we wear, the technology we use, and much more. Even if you don’t bring up money in front of your teenagers, they are watching you anyway.
Discuss how difficult it is to earn money and manage expenses with them. Assist them in realising that the most logical use of funds is to increase the amount of money they have by saving or investing.
Like money management skills there is indeed a key skill to master at an early age.
We are all working hard to ensure that our children inherit a prosperous financial future. To ensure that our children truly appreciate this luxury, we must teach them the value of money and begin grooming them today. Money is a necessary commodity, and it is critical to master personal money management in order to achieve and maintain a decent financial lifestyle.
Leading by example is one of the best ways to teach your children about financial health, and teaching children basic financial knowledge from an early age will benefit them in the long run, allowing them to make life’s big financial decisions and have an expert perspective on their finances.