As the world we live in becomes more entrepreneurial, children may need to learn financial literacy in addition to their regular school subjects. This financial education should begin at home.
Money management is a skill that today, many young people, know very little about. Most young adults leave higher education with crippling amounts of debt and without knowledge of how to make good financial decisions. However, their future depends on understanding the concepts of financial literacy. Money is an essential part of life, and we should be teaching our youth about it before they venture out into the big bad world.
It is never too early to start teaching children the value of money. Even the youngest children can sort change and understand that coins and notes have different values. Their knowledge of finances and savings will naturally mature as they get older, but there are things you can do as parents and caregivers to ensure they are set up for financial success in the future. Below are five ways you can start teaching your children financial literacy:
Teach about wants vs. needs: Even adults have difficulty with this skill. There is a distinction between items, services, and experiences that we must have to survive and those we desire because we believe they will improve our lives. Children who learn this at a young age will have a strong foundation and will hopefully make better financial decisions as adults.
Create ways for children to earn money: Before they can save, children must first earn some money. This can be accomplished through simple housework or, as they get older, jobs such as babysitting and lawn mowing, and then, as they get even older, part-time jobs while in secondary school or college.
Set savings goals: Every child, no matter their age, has a wish list. Make a list of all the toys and gadgets they’ve been wanting, then prioritise them with the most desired item at the top. Then, have the child research the price of each item and calculate how much money they would need to save to buy the item for themselves. You may need to assist them with this, depending on their age. This will not only empower them, but it will also demonstrate how difficult it is to earn enough money to buy something they desire. This should increase their appreciation for their parents the next time Mum or Dad buys something.
Provide a place or account to save: This can be as simple as a piggy bank, but there are better options in today’s world. Parents can open an account for free for their children and deposit as little as £5, and children can learn how to manage it in-person, online, or through mobile banking. This not only gives them a place to save their money, but it also allows them to practice going to a bank and depositing money or managing their account through a mobile banking app.
Show them how money can grow over time: Create a routine of checking the child’s savings account so they can see how money accumulates over time. This can be done through the online dashboard, a mobile app, or in the actual bank building. Children who develop this practice will become adults who feel in charge of their finances.
Teach them what’s new in money: Being financially literate when it comes to coins and notes is crucial, but it is also important to teach children about how money and currency are evolving. A basic lesson on what cryptocurrency is and teaching your child about investment will enable them to be prepared for the future and provides them with a method of creating their own wealth over time. Better still, if you are someone that invests or is learning how to invest you should involve your child in the process. Talk to them about what happens when the shares or crypto coins go up or down and what that means for the investment. You can also explain how people can run into financial difficulties if they invest too much of their income and the importance of investing sensibly, armed with proven good strategies.
These techniques will significantly enhance your child’s understanding of money and their interaction with it.
What often happens is, if we are not taught financial literacy at home, and the education system does little to provide those vital life skills, when we get older, we can often find ourselves having a difficult relationship with money. This is because we never truly learned about it in a practical and positive way. By breaking that generational cycle, you can educate your children to understand and manage money and arm them with the right knowledge and skills to be financially literate adults.
As we move further into a digitalised way of living and working, those coins and notes may well turn into digital currencies, so it is equally important to ensure your children understand what digital currency is and how it is utilised. Your child is probably already very familiar with technology, so by teaching them financial literacy, they will be fully prepared to connect technology and finance to ensure they are well-equipped for the future.
About Marcus de Maria
Renowned stock market and wealth educator, investor, and entrepreneur Marcus de Maria is the Founder and Chairman of Investment Mastery, one of the world’s leading investment and trading education companies.
A sought-after keynote speaker on wealth creation who has shared the stage with some of the world’s leaders in business, success and philanthropy, Marcus has gained mutual respect from many high profiled individuals including Richard Branson, Robert Kiyosaki, Tony Robbins and Brian Tracy.
Marcus is also the author of three books including The Lunchtime Trader, a guide on how to build indestructible wealth by trading stocks for just 20 minutes a day.
After experiencing financial difficulties, Marcus went from being £100,000 in bad debt and sleeping on his brother’s floor to taking control of his financial future and learning strategies to become financially fit, building multiple pillars of wealth for security. He now uses all he has learnt to help others follow this path of wealth creation.
Marcus and Investment Mastery’s greatest adversary is the “Get Rich Quick” mindset – their aim is to educate others on how to create financial independence, security, and ultimately wealth, for themselves and their families. He also aims to teach students about some of the most misunderstood wealth creation vehicles, such as cryptocurrencies and the stock market.
