Is financial education important for the youth? It certainly is because money management skills need to be learned before kids reach adulthood and have to manage their own money. Otherwise, young adults who don’t have financial education can fall into financial traps such as making bad decisions about their personal finances that can take decades to be fixed.
As adults, we are faced on a daily basis with financial decisions that can influence our financial stability. Since money is an essential attribute of life within a society, each individual has to know how to manage it carefully and correctly.
Schools teach kids the principles of mathematics but very rarely how to use them for financial planning. Kids may be good with numbers by the time they graduate, but financial planning has many more concepts such as managing debt, profitable or emergency savings, the time value of money, and efficient budgeting. From counting coins in kindergarten to managing the finances of their own business in the future, it is essential for the price of money to be explained to today’s young people.
What is financial literacy?
The concept of financial literacy translates in the possession of skills and knowledge, gained through financial education, to make informed and effective decisions about all their financial resources. Financial education often focuses to teach people of all ages how to manage their personal finance, the true value of money, how to create and stick to a budget, and how to invest their money wisely.
Teaching financial literacy to kids is the best way to improve financial capacity for today’s young people. It will help them become self-sufficient individuals who can achieve financial stability. Moreover, they will contribute to society’s financial growth because they will nurture an entrepreneurial spirit that will translate in business owners that will sustain the economy.
Why is financial literacy important?
Poor financial decisions can have a long-lasting negative impact on one’s financial wellbeing, their families, and society. While analyzing this problem on an individual scale, those decisions lead to an individual’s bankruptcy, which consequently affects their family members, on a larger scale, it can affect the whole society by leading to a financial crisis.
Moreover, in the fast-changing world we live, the financial landscape is very dynamic with opportunities and principles that are constantly changing. Nowadays, globalization led to the creation of a global marketplace with many more participants and many factors that can influence it. The global marketplace offers alternative investment options that have completely changed the investing landscape worldwide. Today’s young adults, who nurture a passion for technology, have a multitude of online investing options to build financial stability, and even wealth. Young entrepreneurs make the most out of the internet and bring alternative investment methods, such as foreign exchange trading or cryptocurrency trading, into the mainstream. Having real-time access to an unlimited amount of information online which empowers them to discover the most polarizing types of investments such as binary options trading.
Although kids have access to unlimited resources online to learn about investment options, budgeting, and tax planning, they need guidance to understand how they should value money and use it efficiently. Thus, financial education can definitely make a difference by empowering young people to build financial stability and contribute to society’s economic growth.
How to teach kids financial literacy?
Lack of financial education in youth can lead to a precarious financial life in adulthood. Thus, the earlier a child is taught financial literacy and learns about money, savings, and investments, the better money managers they will grow to be.
Today’s young people will be empowered to understand the principles of working hard to earn money, spending, saving, and investing efficiently because early education allows them to become better money managers and nurtures their entrepreneurial spirit. Kids will learn the importance of earning, saving, investing and managing their debts which will help them become responsible adults with financial stability.
Most primary and secondary schools fail to provide kids with quality financial literacy programs. Thus, it often falls to parents to teach their children how to manage finances efficiently. There are many ways to give kids financial education and empower them to do understand all the principles and concepts of today’s marketplace.
Parents can use a jar to encourage kids to save money which will teach them both the difficulty of putting some money aside from the total amount of their earnings and the satisfaction of having money when you really need them.
Another important lesson is to show them that things cost money and they have to pay for their personal belongings. That doesn’t mean that parents shouldn’t buy anything for their kids unless they have their own money, it means that kids should be aware of how much something they want costs.
To help kids learn how to weight decisions and understand the possible outcomes of their financial decisions, show them how buying a toy instead of another will costs them. This will not only make them understand the value of money more but can also teach them to avoid impulse buy which they tend to do especially when they don’t have to spend their own money.
Allowing a child to earn their own money is the best way to teach financial literacy. Most parents want to protect their children and to provide the best life possible for their kids without them having to work for it. However, this may have long-term consequences on the financial education of their kids because they will be unable to asset how hard it is to earn money and why it is important to spend them carefully.
Thus, allowing kids to struggle a little bit to earn their own pocket money is the best way to prepare them for informed decisions and financial stability in the future. Whether it is babysitting, washing cars, selling lemonade or meditating their classmates, kids will understand the true value of money.
Financial know-how will set young people up to handle finances efficiently without falling for any trap that could affect their financial stability in the future.