Basics of financial literacy for children
Now everything depends on money. Money determines whether we will have a roof over our heads, what we will eat and what water to drink, where to study, what to wear. It depends on finances, what kind of vacation we will have and even with whom we will communicate.
Therefore, it is extremely important to know how to handle money so that you do not pay off debts for the rest of your life and be able to eat to live a full life.
A child should be taught the basics of financial literacy in childhood so that they can lead their own life in adulthood.
Financial literacy is a set of knowledge about Finance and its management.
Financial literacy courses for children are becoming more popular these days. They are very important for the development of the child. However, it is not necessary to reduce the responsibility of parents in this matter. The child learns about finances better by a clear example, gradually teaching the child to distribute both family and personal money, explaining their value.
When to teach a child financial literacy
There is no clear age when and what to tell your child about the measure of finances. Everything is individual. But roughly familiarity with the world of Finance can be divided into the following stages
Getting to know money-from the age of 4
Training in conscious spending-from 5 years
Giving pocket money and learning how to use it-from the age of 7
Familiarity with more complex concepts of Finance – banks, cards – from the age of 10
Expanding knowledge about Finance – the ability to invest and earn money independently-from 12-14 years
Financial literacy at home – how to start talking about money?
As mentioned earlier, a lot depends on money, Finance accompanies a person from an early age, so you can and should talk to children about financial literacy from the age of four or five years. At this age, there are a lot of questions about everything that surrounds them, and Finance is no exception.
First, you should explain to your child where the money comes from.
He often thinks that funds come out of thin air, so you can spend as much as you want on anything. It is important to clarify that finances are not infinite, and to get them you need a lot of work that parents do.
Talk about money at the moment when children want to buy something for themselves.
Children’s desires most often arise immediately, and they are not considered.
When a child urgently wants something, it is important to stop and give them time to process their desires.
For example, make a list of what you would like to buy, and whether there is something that could be more interesting and useful.
Tell us how much it costs.
What is the price of gifts, kinder surprises and trips to the amusement Park, and that it is impossible to pend moneys on it too often, because there are other needs.
When you talk about the price of things for a child, you don’t become a “greedy” parent. You do the right thing and develop their financial literacy!
To clearly show how much money the family gives for fun, you can take children to the store with you and talk about prices. Compare prices for a large chocolate bar that you can eat in a day, and for a pack of equally delicious cookies, which is usually enough for a few days.
Teach the child to think whether it is really necessary to buy this thing.
The same applies to toys and clothing-analyze what you need and want most. It is useful to make a shopping list together and talk about the wishes of all family members.
This way the child will understand that finances in the family can not be spent only on him.
The main lesson about financial literacy that a child can learn from childhood is to think, plan and evaluate the situation before buying things.
Conscious consumption-teach your child to spend money ” wisely»
An essential skill in spending money is to be able to buy profitably and take quality into account. In other words, we need to develop conscious consumption. To do this, teach your child to answer the following questions.
“Is that what I need?”.
Wish lists and discussion will help here. Impulsive purchases usually become completely unnecessary later.
“Is it profitable?”.
Of course, you can show the cost-effectiveness of purchases on products, but this does not always fully reveal the idea. For children, it will be easier to talk about reasonable spending on the example of equipment or toys. Together with the child, think about how long this or that thing will last, how often you can potentially use it (so that it does not gather dust in the corner), at the “advanced” level, you can understand the characteristics and decide whether this thing is worth your money.
Can I find a better and more profitable way?
An important stage is the ability to choose. It is useful to develop a habit not to stop, for example, on one phone model in one store, but to compare, find more practical options, and may even search for stores with promotions on a particular item. In addition, now it is much easier to do this, there are a huge number of sites that allow you to compare prices for almost any product.
Choose things for your child together, discuss and compare prices. If you can save money, discuss together how you can spend the remaining money.
Pocket money and savings
An important point in children’s study of financial literacy is pocket money. This stage of the relationship with money can begin when the child understands what money is and acquires sufficient independence.
You need to allocate money to the child.
Determine how often you give him money, discuss the amount. It is important that the child clearly understands how much and how often he will receive at his disposal.
Giving money for out-of-pocket expenses is one of the most productive and practical ways to teach children how to manage their finances.
The child has a sum, and it can be spent on anything. It is not right to limit the purchases that a child wants to make.
Pocket money belongs to the child, and only he manages it!
It is worth discussing his plans for spending money, but it is not worth arguing that this thing is “not necessary”, “useless”. Talk about prices and what you can buy now and what you need to save up for.
Increase the amount and allocate money less often.
In other words, you can start by giving 20 rubles a day, then 140 rubles for a week, and then you can allocate money for 2 weeks or a month.
So the student will always need to keep in mind whether this amount will be enough for him until the end of the month. For some time, the amount may fluctuate to find one that both children and parents will be comfortable with, but do not overstate it too much. Otherwise, the child may stop valuing their pocket money, spend too much and do not think about boundaries at all.
Discuss with your child their plans for money.
First, you can help figure out how much some of the main things that children want to spend their pocket money on cost, and how to adjust expenses. You can also teach children to save money. This is closely related to the conscious consumption discussed above.
Well, if children get used to thinking before buying another ice cream: “Maybe I’ll eat at home for a few days, and at the end of the month I can buy those cool headphones?”. It is important to learn this financial skill — to distribute your priorities and desires in the field of purchases, and sometimes discarding momentary impulses, “save and save a penny”.
Accumulation is not the goal.
But we must never forget that constant aimless accumulation is often useless and destructive in the long run. When money is the only goal, its value and meaning are distorted. This very “penny” — just sheets of paper. The important thing is that you can exchange these pieces of paper for ice cream or something more valuable.
Money is called a means precisely because it should not be a higher dream, but is needed to fulfill dreams.
Learning to spend.
One of the most difficult skills of financial literacy is the ability to spend. Teach children not to be afraid to buy these headphones if they have the opportunity and a really strong need.
You can “bathe” in money, constantly save, but this will not make anyone happy.
Now many people develop financial anxiety, because of which they deny themselves absolutely everything, and it does not matter whether they earn a million a month or forty thousand. The situation can only get worse because of a lot of parents who say: “If you have money — you will be happy.” And often adults completely forget that they do not tell you what can be done effectively with money.
Earnings and independence
A more serious stage in teaching children financial literacy is getting them a real salary, their own money.
Mostly, teenagers start looking for work from the age of 13-14, as there is a strong desire for independence, and at 14 there are more opportunities to acquire partial financial independence through employment.
At the earnings stage, training from parents is often inferior to self-education, and special courses for teenagers can also help – it is more interesting, easier to learn and you can avoid many mistakes.
This is an important step in everyone’s life, and many things can be learned through work.
From the moment a teenager begins to earn money for himself, he sees in practice what he was told about as a child:
Money is earned by work, and any work has value.
This is a limited resource that needs to be replenished.
The importance of time opens up, because deadlines can burn if you get a freelance job, or time literally becomes money if you work in shifts and get paid for an hour of work. In most cases, you can earn a lot more from your” own ” work than your parents give you.
A working teenager gets not so little money for him, and they can officially spend it on anything.
What happens in this situation depends on the level of financial literacy already acquired by children.
For parents at this point, the main thing is not to refuse to help children under the pretext that once they receive their salary, they are adults and can do everything themselves.