Money management and financial literacy in children

Money management and financial literacy are important life skills, which even young children can start learning. You have a big role in helping your child build these important skills. Money management is earning, saving, spending, borrowing and repaying money. Financial literacy is the ability to manage money in ways that help you achieve your goals in life.
How to make this happen?
- Start early – Never too young to start teaching your children about money. Teach the various concepts associated with money as appropriate for the child’s age. Learning about money and developing financial literacy from a young age can help children develop responsible money habits and attitudes for later in life.
- Set example – The best way for kids to learn is by watching and imitating their parents. As a result, it’s critical for parents to set a positive example and provide sound financial advice. You can influence your child’s attitude by using money responsibly. Utilize shopping occasions the most. Practice ‘Delayed gratification’ – Wait, save rather than spending immediately on something.
- Source – It is important to let them understand the ‘source’. for example, from your work, the government and so on.
- Save, spend – Encourage them to maintain jars, piggybanks etc. where they can decide where their money goes. It gives them a sense of control and better understanding of the concepts. They can watch how the money grows when they don’t spend it and shrinks when they do.
As children get older, set up a family-friendly, safe mobile money app. You can use these apps to track savings and spending overtime. Help them track how the balance changes as money goes in and out.
Encourage them to open some sort of Bank account that benefits them in the long run and teach them concepts such as compound interest.
- Planning and budgeting – Involve your child in planning and budgeting for the family. For example, if your family is thinking about getting a pet, a vacation or a large purchase. This will make it clear to them how important it is for the entire family to make wise financial decisions.
- Needs and wants– By differentiating between needs and wants, you may teach your kids to prioritize their expenditures. This will support them in making sensible financial choices and preventing overspending.
- Value for money– Getting value for money depends on first understanding the value of things. It’s important to develop in kids a feeling of the worth of money and the sacrifices necessary to earn it. Make them understand why you might buy things on sale, why you might choose an expensive item over a cheap one, why the same sorts of things can cost different amounts, why different things cost different amounts etc.
- Teach Children the Importance of Giving- While earning, saving and spending are important, so is helping those less fortunate. Explain to your kids why you give money to charity and encourage them to give some of their allowance or other earnings to the less fortunate.
- Don’t shield Kids from Financial Realities – When parents lack confidence or control of their own financial situation, they can be less willing to talk about money with their children. If you’re transparent about your money choices instead of leaving kids in the dark, you’re setting them up better for success by helping them understand the power money can hold and providing opportunities to learn from your mistakes together.
In a world driven by financial decisions, imparting valuable money management skills to children is more crucial than ever. As parents you hold the power to shape young minds, equipping them with the tools they need to navigate the complex realm of personal finance.