When it comes to educating young children about the world, parents may believe that certain issues, such as politics and religion, are too sensitive to explore. Money is the second. Parents may be unsure of how to address the topic or concerned that they are not setting a suitable financial example for their children.
However, discussing finances should not be avoided. The first step towards financial literacy and, ultimately, financial independence is to discuss it. Too much delay in having dialogues with your children can leave them in the lurch later in life. In South Africa, for instance, only 42% of citizens are financially literate. The figure is 32% in Ghana and 26% in Nigeria. This indicates that a significant proportion of adults in these countries lack financial knowledge and comprehension.
This emphasizes the significance of initiating conversations about money at a young age to ensure that individuals have the information, skills, and confidence to successfully handle their finances.
Perhaps you believe that your child’s allowance is sufficient to introduce them to the concept of saving and the worth of money. However, research indicates that an allowance is most useful when coupled with instruction on saving and budgeting.
Children are influenced by several factors, including school, peers, and the media. But their parents or primary caregivers have the largest impact on their financial socialization — that is, the beliefs, knowledge, attitudes, and behaviors that support financial well-being. The earlier you initiate the discussion, the better; the majority of 11- to 17-year-olds lack confidence in managing money.
If you’ve ever wondered how to teach your children about money and budgeting, here are five suggestions for youngsters over the age of 10.
Setting financial objectives is an essential component of learning how to manage money, as it requires you to prioritize your financial demands. It requires systems as well. Studies have demonstrated that people perform better when their tasks are written down.
There are a number of free and printable online goal charts that kids can use to mark off or color in the amount they’ve saved. Children who are visual learners benefit greatly from goal charts or clear jars since they can “see their savings grow” over time. And, similar to crossing items off a to-do list, it is pleasant to assess progress and have evidence that you have worked towards reaching your objectives.
When paired with a financial objective, the drive to build money is enhanced. As adults, we understand the necessity to store for a rainy day, however a child may be unfamiliar with this concept. Consider emphasizing the significance of saving in regard to an occasion that a youngster can relate to, such as a birthday or Christmas.
This not only encourages children to save for something they are passionate about. It also teaches children financial discipline (not to use the savings account too soon) and delayed gratification (they can access the money in the kitty now but will miss the opportunity to have more money available from it in future).
Savings are not usually motivated by a desire to spend. It is also vital to encourage children to save because we never know what tomorrow will bring. As a child’s financial understanding develops, this lesson may be better understood and appreciated.
For older children, or at an age-appropriate level (research indicates this is between 12 and 17 years old), the discussion on saves can be elevated to include the concept of investment.
While saving refers to the accumulation of funds by the deliberate reduction of expenditures, investing is the acquisition of an asset that generates income from the asset itself. Engaging youngsters in a discussion about whether to save versus when to invest can instill a valuable financial lesson from which they will benefit in the future.
Budgeting can be taught to children in a child-friendly manner. Take an impending birthday celebration as an example: You can use straws (or something similar) to demonstrate that the total number of straws is the budget for the birthday party. The objective is to teach children how to work within budgetary constraints. Create a list of the items required for the celebration and let the youngster to distribute the straws accordingly. This is an opportunity to demonstrate that allocating too much to one item will come at the expense of another. If you deem it suitable, you may substitute genuine currency for the straws.
You can manipulate this until you and your partner reach an agreement on the budget (also bearing in mind that the entire budget does not have to be spent, and what is unspent can form part of their savings). After the celebration, review the budget to consider what the kid has learned about the process, including their preferences. This also teaches that even enjoyable events require organization and fiscal responsibility.
Children are frequently taught the value of sharing. This lesson can be expanded to include financial education. Money is not merely a resource for spending or purchasing goods; it may also be utilized to assist others. By donating or contributing to a cause that a child loves about, they will learn to be financially helpful and to have empathy for those who do not share their benefits.