Helping children to become more financially responsible is an international priority. But, why is it so important to instill financial awareness in people at a young age?
The latest research revealed that young adults lack money management skills, so they have no idea when to spend money, what their financial priorities are, and how they can save. It’s essential for parents worldwide to help their children acquire financial education to enter prepared the adult financial world.
Daily, children watch their parents’ spending habits and learn from their actions. Parents need to teach their children not only how to spend their money, but also how to make savings.
Children are living in a world where when they see something they like, they buy it without thinking if it fits their budget. Parents should be role models for children because their kids easily adopt their spending habits.
Can money conversations from childhood affect adults’ decisions?
When parents have money conversations with their children, they help them grow into financial responsible adults. This is a great way to develop a healthy relationship with money. Research proves that the children who learn healthy money habits from a young age, like getting an allowance, helping their parents with house chores to gain extra cash, and helping their parents to allocate household items to save money, also learn the principle of efficiently prioritising resources. These activities can boost children’s financial sophistication and offer them a great outcome in their adult life.
How do modern children learn to manage finances?
Today parents remember the times when their elders offered them a few dollars to buy something for lunch at school, or when they could keep the change if they went to buy milk from the local store. They stuffed the money in their pocket and they bought what they liked. But nowadays, parents need other ways to teach their children to manage money. They grow in a world where technology control financial actions and transactions are no longer tangible. Few transactions imply cash and learning to be financially savvy is more difficult than ever.
All the games children love to play nowadays come with a cost, and the user can make an in-app purchase, but this means that the transaction is made away from the hands of children. Not few are the cases when children using their parents’ smartphones spent thousands of dollars on in-app purchases without even knowing what they are doing. So, parents need to learn how to control the in-app abilities their tech devices have and how to teach children to stay away from platforms that provide paid games.
The problem has gotten out of parents’ control lately and in some cases law enforcement organisations had to conduct investigations on app providers like Google and Apple. The Atlantic reported in 2017 that Amazon decided to give back $70 million to the users whose children made in-app purchases.
So, nowadays when money is not literally in children’s hands, parents need new and more creative ways to teach their children to manage their budget.
Children need to learn the financing basics
The University of Cambridge revealed children from age 6 can acquire general financial information because they understand how money affects their family’s wellbeing. It’s not easy for parents to talk about money, but it’s important to share this information with their children and not treat the subject as a taboo. If they have difficulties in paying bills and buying things, they should let their children know what their budget is and what they afford. It’s not recommended parents to try to protect their children from the realities of their financial situations because it will help kids better understand what they can ask.
Lately, companies have decided to implement salary transparency to encourage parents to have a financial conversation with their children. Parents can even find free online apps they can use to teach their children the basics of managing and saving money. Many of them are simple to use, and designed like games that ask children to complete certain financially related tasks.
Schools should deliver financial literacy
At present, schools worldwide don’t find teaching money basics a priority. But more and more parents and students wish for schools to deliver this subject. Some people prefer to enrol to classes provided by third parties to improve their ability to manage their funds.
Around 15% of the world’s students have to follow financial classes because governments decide what subjects, children study in school. In some cases, parents decide to enrol children to extra classes, and in other, schools determine financial education is mandatory and they add financial literacy to their curriculum.
Nitro, a student loan educational platform surveyed in January 2019 and it concluded that from 1,000 millennial’s, 76% considered essential people to study personal finance in high-school. And more than 85% of them stated that they don’t think high-school subjects prepare them for real life situations that imply managing finances.
Numerous innovative financial literacy programs have been designed to expose youngsters to the world of finance in a fun and engaging way. Generally, classes are made up of two or three students and a tutor. The tutor helps make sense of it all, acting as a facilitator. Students, on the other hand, learn by explaining their ideas to others. They develop skills such as problem solving, numeracy, and the ability to handle large amounts of info and data. Some of them arrive in unexpected places later in life. For instance, students can end up working in the finance sector, even though they possess a chemistry degree.
Technology is a helpful way to help children understand the basics of managing finances
Technology is a helpful aid parents can benefit from if they want to introduce their kids to financial basics. For example, they can use apps that target kids who help with house chores. When they successfully complete their tasks and their parents approve them in the app, they get a certain credit score. Some of the rewards are monetary while others imply activities like playing computer games, getting a new toy, spending more time with their friends, or other similar activities.
Other apps allow children to track their allowance and to schedule their payments. This way they can keep a track of their transactions and split the sum into different categories, from priority purchases, to extra spending, and savings.
However, it’s recommended parents to use tech apps only as a complementary method to teach their children more about finance. They should rely on offering a healthy financial model and on teaching them how important is to manage their savings effectively.