September 30, 2022

The Importance of Financial Education for Kids


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  Financial literacy is a complex topic, one that some adults today still do not fully grasp. Since this is the case, many adults feel like they’re not qualified enough to share helpful money tips with their children. This is far from the case! Many experts suggest that conversations about money should begin early in the home to capitalize on a vast array of benefits. Since financial literacy is not covered in most school curriculums, the responsibility of financial education often lies on the child’s parents. 

  Regardless of the source, kids will develop money skills somehow.  However, having proactive financial conversations while they're still young can help improve these skills and prepare them for success. 

How To Teach Your Child Financial Awareness 

  In the world of credit cards and debit cards, spending and saving, adults today are still learning how to best manage their finances. The most important thing for a parent to do is to act as a role model for their child when it comes to managing their expenses. Kids are always observing the actions of those they look up to, and if a parent models good financial behavior, their child will soon apply those responsible efforts later on. 

  One way to practice being a good financial role model as a parent is to emphasize the importance of saving money. You can do this in many ways, but one idea is to provide children with opportunities to earn money, such as through an allowance. Once kids understand the concept of budgeting, encourage them to prioritize these lessons by saving 10% of their earnings, as 15 to 20% worth of savings is recommended for adults. Lessons about saving are essential since it gives a child the ability to make larger purchases. And while a child may save for more trivial purchases now, like a bike or a new video game set, the act of saving prepares them for those big life purchases later on like buying their first home. Getting in the habit of budgeting and saving their money will set your kids up for financial success in the future when it comes time for more substantial spending goals. 

Be Transparent About Your Financial Journey

  Every person that has a type of income has some form of financial history. This long list of history includes every purchase made; some more substantial than others. A parent can help offer clarity to their children by having a conversation about their relationship with money, and discussing any major mistakes they made when they were younger. When a parent is transparent about their spending and saving habits, they are opening the door to a realm of improved financial decision making. 

A parent must also explain the weight of financial decisions by discussing the risks associated with a purchase. Concepts like financial debt, interest rates, and bankruptcy can be avoided if the child knows what they are and how to prevent them. When a person understands why these topics should be avoided, they are less likely to go down the wrong path.

  All and all, financial education is important for children because it can help prevent costly mistakes later on in their lives. Many people grow up with no prior financial knowledge which may make financial decisions harder to interpret and understand. It is inevitable that once your child reaches adulthood they will need to find ways to manage their personal income, and introducing financial literacy early on grants them the opportunity to make better decisions in the future. 


Photo by maitree rimthong: