According to the 2018 Survey of States, only 17 of the 50 American states require high school students to be taught financial education. And according to a report by the Champlain College’s Center for Financial Literacy, most schools that provide financial education end up doing a poor job. Only five states scored an “A” for financial literacy in schools. As a parent, it’s essential that you take the initiative to make sure your children have adequate financial education.
Financial education will help your child in later life
“I think parents need to start teaching children about the importance of managing money at an early age. Sometimes parents wait until their children are in their teens before they start talking about managing money when they could be starting when their children are in preschool,” investor Warren Buffet said to CNBC. Waiting for too long to educate children about money risks developing negative financial behaviors that can be difficult to remove later in life. When reason-based financial practices are inculcated in childhood, like all good habits, they will stick on for the rest of their lives.
Make your children aware of the importance of saving money. Since they are not adults, the children are not exposed to the harsh realities of life and are completely oblivious to how savings stabilizes life. To develop a culture of savings, try buying them things only when they save enough money from their monthly allowance. For instance, if you give children $20 every month as an allowance and they want an item that costs about $50, ask them to save for it. If they save $10 per month, the child will be able to buy the item in five months. This will teach your children the importance of savings, while at the same time instilling virtues like patience, an important lesson in their financial education.
A person will not be able to get everything they want in life. To get something, you may have to give up on something else that you dearly want. It is critical that this truth is understood early on in life. Even if you are in a position to buy whatever they want, it is better that you make them choose. If your child demands that you buy all the different variations of the toy at the store, ask them to select one. As parents, following this principle will ensure that your children are capable of distinguishing between the things they really want from those they just like.
Teach your children to keep track of their spending. Give them a notebook and ask them to write down every single thing they spend their allowance on. After a few months, analyze their spending and encourage them to find out where they could have saved money or changed their spending habits. This exercise will teach them the necessity of monthly budgeting, which will help them manage money better when they grow up.
Companies spend billions of dollars every year advertising to children. A study found that smartphone apps for children below 5 years of age contained at least one advertisement. These ads are designed to emotionally create desires within children to make a purchase. It is necessary for parents to teach their children about such ill-effects of advertisements and make them realize that they shouldn’t spend their money irresponsibly just because they got tempted by an ad.