The building blocks of financial literacy education
First of 2 parts
“COLLEGE graduates spent 16 years gaining skills that will help them command higher salary, yet very little or no time is spent helping them save, invest and grow their money.” (Vince Shorb, CEO of the National Financial Educators Council, USA)
In my last article, I wrote about the younger generations, Gen Ys and Zs, being more financially aware and conscious than we were at that age. How a good number of the youths today are more empowered to take control of their own finances. But at the same time, how majority of these generations still lack the proper financial education that can guide them through their lives.
When you ask these young people how they learned to manage their own money, most of them will say they learned it only when they started adulting. It was only when they started earning and spending their own money and making money decisions by themselves, did they learn about financial management. They were just learning to swim while already in the middle of the ocean. It was a case of sink or swim. There were some who learned and swam out of it successfully while many failed and drowned in their financial woes.
Sad to say, but most of the financial problems we are now experiencing were rooted in our ignorance of money matters growing up. If only we knew about money management early on, it would have been a different story for many. If only we were guided about it when we were young, many would have gone through it properly. If only the adults in our families modeled us the way, many would have avoided the warning signs. If only we learned the basics of financial management as we were learning the basics of writing and reading, many would have developed the right finance skills. If only…
But we now have the opportunity and the power to break this ignorance among our children, grandchildren and the generations to come. And because the world has changed and will continue to change dramatically, children today must be more financially educated. Managing money is no longer just a concern of, and therefore should only be handled by, adults. It is now considered an important life skill, which children should learn and develop early in life.
Financial literacy is all about teaching children the basics of money management, such as saving, budgeting, spending, giving and investing, among others. Knowing these ABCs sets the building blocks for our kids to develop strong money habits early on and avoid many of the mistakes that the earlier generations committed.
But like all other kinds of learning, financial education is a process which should start in our childhood and continues all the way to our retirement. Unfortunately, for most of us, the education came much later.
Starting our children early on would mean an active involvement of the two very important institutions, where children learn the most: the family and the school. Child development experts say that many of our financial habits are set by age 7, during which much of our exposure and influences come from our family. How can we as parents teach our children some key money lessons?
Involve your kids in money talk. Kids tend to be a lot more perceptive than we think. They observe and absorb what they see around them. And because kids today have more access to information, they are more knowledgeable and can participate in informed discussions. Even when our children were much younger, they were already aware of where the main household income is coming from, why both of their parents have to work, why they cannot have or buy things even if we can, or how much we need to save for our next vacation, etc. If they see us making prudent decisions, and somehow involved in making those, then they’re likely to imitate those behaviors later in life.
Teach them to save. No matter how small it is, our kids have to learn the value of savings, either to buy something they want or for rainy days. Our kids had their own piggy banks where they put their savings from their allowance. We incentivized them by matching the amount they saved at the end of the year, which they then put in the bank. Later on, we transferred them to mutual funds where they see how their money grows. Up to now, both of them are making their own investments.