Although there are some classes on financial education at schools today, it should start at home. The main concepts of this topic should be taught by parents who want to develop such significant skills in their kids and help them shape a better future. Experts believe that children start to develop finance-related habits before they even turn 7 years old. It means the earlier you begin teaching your child finance, the easier it will be to adapt to real life, make the money borrowing process correct and avoid financial disruptions in adult life.
Why Is Financial Literacy Important?
Financial literacy is a special term that defines the ability of a person to understand how money can be used as a tool to improve their well-being and living standards. Once you know how to manage your money you will be able to learn about spending, investing, debt management, and even starting your own business. All of this is important for the future of our children as they live in a modern streamlined world with numerous gadgets and technology.
Being financially-literate means you can understand the money and manage them accordingly without getting into too much debt. Of course, many people take out various lending solutions to make big-ticket purchases or invest in something. But if you aren’t aware of the way to budget and manage your personal finances, you will most likely get into the debt cycle.
According to Educationdata.org, the amount of outstanding student loan debt in the USA has become $1.6 trillion in 2020. This is a whopping number as this type of debt has already become the second-highest consumer debt category in this country. It proves the fact that financial education is something we strongly need to teach our children to help them avoid such mountains of debt and further financial issues in life.
Educating Children on Finances
Don’t wait until your children grow up and start making their own mistakes. It’s your duty to show them how to manage money and reach financial freedom. Children have different views and abilities at different ages. Here is how you can start teaching financial literacy to your kids according to their age:
3-6 Years Old
This is a perfect time to start introducing money-related topics to your kids. They are very curious at this age and try to learn new experiences. While they are eager to acquire new knowledge, it’s a great opportunity to introduce the major finance-related concepts to them while you play. For instance, many children get money for their birthday these days. You can advise saving these money gifts in a special jar or piggy bank.
Every time you give your children some cash for their birthday or any other holiday, encourage them to count how much they already have and think about possible ways to spend this money later. Kids are visual creatures at this early age. They want to see how much money they have and they will definitely be excited about the ways they will be able to invest this money once they save enough. It’s great if you let your kid set a target and strive to achieve it without wasting the cash.
7-13 Years Old
This is a period your children turn into teenagers and start to develop new skills. This is a transitional period for them when they view their parents as an example. Hence, your financial abilities will affect the way your teens see financial topics. If you can’t cope with money and have a mountain of debt, how are you going to tell your children what to do with the money?
Make sure you’ve already developed your own financial literacy and present an established example for your kids to follow.
“It’s really essential to be honest and open about your family and personal finances. This way your kids will relate to the values of your family and understand your financial decisions better,” says Leonie O’Connel, a financial advisor.
Now is the perfect time to demonstrate the difference between needs and wants. Your children should develop daily habits to help them learn more about shopping and saving. Children also need to learn about budgeting to prepare for the future. They are now responsible for their pocket money, so you need to be strict and let your kid know about spending categories they need to finance themselves using their pocket money. There are many useful online apps and tools to help children become more financially-literate right from their smartphones.
14-18 Years Old
At this age, teenagers are focused more on their future and adulthood. They are willing to become mature and grow up as soon as possible. But adulthood means more responsibility than ever. Parents need to prepare their kids to move out and start their own life while knowing how to manage their personal finances, spend and save money.
Once your kid starts having their own cash or even finds a part-time gig, you should get them a debit card. This way they will know where the money comes from and where it goes. Now it’s up to them to spend this money or save and invest it later into something valuable. This will teach them budgeting. Knowing that you have to earn that money will bring more responsibility and seriousness to their lives and make them more cautious with spending.
All in all, it’s really important to start giving financial education to your children at a very young age so that they are fully aware of money-related topics and know how to manage their finances once they grow up. If you worry that your kid might follow in your footsteps and also have debt, it’s essential to develop your own financial habits so that you become a good example for your children.
Family Saving Money In Piggybank -DepositPhotos