Caring parents are concerned about the well-being of their little one: when they are tiny, this manifests in buying quality food and practical clothing. As they grow up, adults try to “give them a fishing rod” so that the child can catch their own golden fish and, accordingly, realize themselves. In the age of the digital economy, not all parents succeed in keeping up with its trends. Let’s figure out how to properly instill the basics of financial literacy in children of different ages.
Why is financial literacy beneficial for children?
In kindergarten, kids encounter the basics of financial literacy for the first time. Children eagerly play in a kind of “store,” where commodity-money relations are formed.
Sam X Renick, an expert in financial education, commented on the basics of economic education for children for Forbes, saying, “Saving teaches discipline and delayed gratification,” Renick says. “Saving teaches goal-setting and planning, as well as reinforcing children’s safety and independence.”
Unfortunately, many parents do not know how to help their children become financially literate. T. Rowe Price, an American holding company, conducted a sociological survey on how parents communicate with their children about economic literacy. The survey results showed that nearly half of parents miss the opportunity to talk to their children about finances. And a quarter of parents said that they are very reluctant or extremely reluctant to discuss the topic of economics with their children.
What is the basis for teaching children financial literacy?
Teaching financial literacy to children and teenagers is based on basic principles: practical knowledge and easy-to-understand explanations of fundamental terminology related to managing money, investments, credit, and financial risks. This can be done through games, solving situational tasks, and providing visual examples of financial operations, which helps children master the principles of economic competence and subsequently follow them.
Let’s take a closer look at the basic principles of financial education.
The earlier, the better
When it comes to educating financial literacy for elementary school children and young children, use simple language and concepts. In addition:
- Teach the child the basics of handling money and its value through everyday experiences. Take the child to the store to go shopping and explain how to compare prices, teach them to make reasonable decisions about purchasing goods to plan their expenses wisely.
- Draw the child’s attention to the need for savings.
- Play games with the child that are related to finance. A good example is “Monopoly”. The child will learn concepts such as “debit”, “credit”, “collateral”, and many others through personal experience.
Do not be afraid to give the child money. Even if they spend the money unwisely, the negative experience will protect them from wastefulness in the future.
Develop the habit of saving in your child
For elementary school children, financial literacy starts with expenses. To teach your little one the basics of money management, provide them with a piggy bank where they can save coins or bills they have managed to save.
To impress upon children the importance of saving, Sam X Renick suggests adults use these motivators for their kids:
- Saving is a good habit.
- I love to save.
- It’s rewarding to save money and build your future.
When it comes to financial literacy for teenagers, parents can open a kids’ bank account. The teenager will be able to monitor their expenses visually, earn interest on deposits, and track their balance using a statement. The advantage of using a card is that parents can monitor all transactions.
Explain to your child that “money doesn’t grow on trees.”
While it’s clear to most people why saving money is important, it’s much harder to convey the value of earning money to children. Not every adult can appreciate this significance, let alone children. Therefore, give your child the opportunity to earn money on their own without breaking the law. But how can this be done? According to child psychologist Dmitry Karpachev, children can earn pocket money at any age by walking dogs, doing crafts, gardening, and much more.
“Market relations in the family alienate parents and children from each other and destroy trust,” commented the psychologist.
Therefore, encourage your child to work outside the home.
Teach your child not just to earn, but to invest.
When a child has mastered the basics of finance and you see that they handle money responsibly, a great decision is to move on to the next stage – investing. However, before starting to invest, it’s important to understand the risks and make thoughtful decisions. Therefore, it’s best to make these financial maneuvers together with your child.
Before starting to invest, parents should themselves understand the basics, create a financial reserve, and only then provide this information to their child. Adults should be confident in their actions and rational use of assets. Otherwise, the child will form a false opinion about this way of investing and put a cross on it. It should be noted that investments are an excellent starting point for schoolchildren in developing business thinking and financial literacy.
If you’re not knowledgeable about investment principles, it’s recommended to acquire special literature on financial literacy for teenagers. The principles of modern economics that the authors present can be useful not only to your child but to you as well.
In conclusion, it’s worth noting that financial literacy for preschoolers, younger school-age children, and teenagers is of fundamental importance. The future attitude of the child towards money depends on how you provide information. Teach your children and keep up with modern economic trends yourself!
