Most parents know the importance of teaching children to read. But few place enough emphasis on teaching them about money.
Financial illiteracy among children is an epidemic. A recent OECD Pisa study found that only 15 percent of 15-year-olds were able to make simple decisions about everyday spending. That’s devastating.
Financial responsibility means clever saving as well as smart spending. If children don’t learn financial responsibility at an early age, they may have difficulties dealing with money as adults. Schools are beginning to recognise that financial literacy is a core life skill, which needs to be taught, but progress is slow.
Here are some easy tips for parents to get their kids on the right track to a prosperous future.
3- TO 5-YEAR OLDS
Once children enter preschool, they have – hopefully – learned a little bit about delaying gratification. That’s a good time to begin teaching them about money. Children this age are able to understand that they may have to save up for something before they can buy it. Lessons like having two piggy banks, one labelled “spending” and one “savings”, can create visual and physical boundaries.
6- TO 10-YEAR OLDS
As they enter school, children should become part of the family financial responsibility plan. Discuss purchases with them. Let them into decision making. For instance, is it worth 50 cents more a jar to buy a name-brand applesauce that tastes just as good as a less-expensive generic one? The important lesson for them to learn during this time is that money is finite. As a limited commodity, they have to decide what is important and find ways to get more bang for their buck.
11- TO 13-YEAR OLDS
Teaching children about anything gets tricky once they enter the teenage years. Move away from piggy banks to digital apps. FamZoo, for instance, is an online, virtual family bank. Funds are managed by the banker (parent) in IOU accounts or prepaid cards. Parameters are almost limitless. Parents can set up automated allowances, offer rewards for doing odd jobs, set up “payroll” withholding to be used for saving, set up budgets and more. Manoeuvring through the apps such as FamZoo will prepare teenagers for managing savings accounts, balancing a checkbook and creating a personal budget later on.
Last, but certainly not least, be a good example. Your children are watching your every move – and purchase.
This article does not consider your personal circumstances and is general advice only – unless otherwise stated. You should not act on any recommendation without considering your personal needs, circumstances and objectives. Adroit Financial Group recommends you obtain professional financial advice specific to your circumstances.
Source: Allianz Insurance