Over the years, the importance of financial literacy at an early age has become increasingly apparent. Many of us might have made different choices if we had had the knowledge to make informed financial decisions early on.
Parents and learning institutions often focus on teaching children essential life skills such as reading, writing, and curriculum courses.
However, one crucial skill that is sometimes overlooked is the knowledge required in decision-making regarding personal finances.
Understanding the value of money and the importance of budgeting, saving, investing, and managing debt are skills that can benefit one throughout one’s life.
It is never too early to start teaching children about money. However, to get it right, make it fun and build interest through games and activities. Children can begin to understand basic concepts, such as the difference between coins and notes. They can best relate to everyday situations to introduce these ideas, such as shopping and paying for a meal. As they learn addition and subtraction in school, concepts like payment and change become more meaningful.
Children learn by example; it is important to model good financial habits. Let them see your budget, savings plan, and responsible financial decisions based on taking debts, loans, and even credit cards.
Explain your thought process and involve them in age-appropriate ways, such as letting them help with grocery shopping and comparing prices. Explain the money cycle, needs, wants, and what it means not to have money.
Saving is an important habit to instill in children from a young age. Each time you give them pocket money, encourage them not to spend it all and let them think about buying something they need, such as a toy, a new tablet, or a phone cover case.
Financial literacy helps them set saving goals and understand that saving money now can lead to greater rewards in the future.
Budgeting is a fundamental skill for managing money effectively.
Children can best relate when they can differentiate between a need and a want. With this knowledge, they can prioritize their list when it comes time to make decisions independently.
Emphasizing what may seem like a need now, a time to come, may make little sense to them.
When explaining investing to children, use appropriate language for their age and level of understanding.
For the younger ones, use simple terms and concrete examples. For instance, let them imagine they have a magic jar to spend money on. When they put money in the jar, it is like planting a seed; You water the seed by adding more money over time. After a while, just like the seeds grow into beautiful plants, their money in the jar grows, too.
It is making your money work for you and grow over time.
You can introduce more complex concepts like stocks and bonds as they age.
Most importantly, explain the benefits of investing, like earning interest or dividends.
Explain how investing can help them achieve their financial goals faster and provide financial security in the future.
Teach children to be intelligent consumers by comparing prices, looking for deals, and avoiding impulse purchases. Self-discipline is mandatory, especially with their exposure to online shopping. Online shopping can be addictive; hence, moderation is needed.
Once the lessons have been taught, create environments for them to take on financial responsibilities. Please give them a small allowance and encourage them to budget it for their expenses. This helps them learn about the consequences of their financial decisions in a safe environment.
Celebrate their achievements when they reach savings goals or demonstrate responsible spending habits. This helps reinforce positive financial behaviour and encourages them to manage their money wisely.
By nurturing financially savvy children, we prepare them for personal success and contribute to a financially literate global community. Let us empower our children to thrive, one budget at a time.
Sylvia Achieng, Crawford International School Physical Education, Business Studies and Economic Management Science Teacher.
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