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The Importance of Financial Education among Children

Published by SchoolAdvisor | Jun 02, 2021
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What is Financial Literacy?

Financial Literacy

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Financial literacy is not something that parents prioritise in their children’s education. However, like English, financial language is equally important if one wants to strive in the fast-moving world. SchoolAdvisor has gathered information from financial education expert, Little Tauke about the importance of teaching the younger generation financial literacy.

Ms NG Pui Yee, one of the founders of Little Tauke has described to us the meaning of financial literacy in its simplest form, which is knowing how money works and making responsible decisions, financially. As adults, you may wonder, is teaching kids about money the same as teaching them financial literacy?

Ms NG answered, “It is pretty much the same.” Although, there is no denying the fact that financial literacy has a much broader spectrum that involves the ability to understand and effectively apply various financial skills to achieve financial wellness as well as success. But for kids, they are usually introduced to the financial element through money.

Parents are the Best Financial Advisor to Young Kids

Teaching Children about Money

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Parents especially play a vital role in teaching children about money. Toddlers spend most of their time at home with their parents. A lot of what they learn between the age of 3 to 5 comes from watching what their parents are doing. Ms NG highlighted that kids can be taught about money from as young as three years old but the lessons have to be age appropriate.

Grocery stores or restaurants are some of the places where parents can explain to their children about the handling of money. These settings are perfect because they are part of our everyday lives and we need groceries and food for survival.

You can start by telling them that each of the items that you put in the cart needs to be paid using money before it can become yours. Children will begin to understand that everything around them has value and spending money the right way is important.

Money Cannot Be Easily Withdrawn from the ATM

One of the most important things to teach children is that money is a limited resource. Ms NG emphasised, “A lot of kids think that money is UNLIMITED which is why they spend money without a second thought and as soon as they run out of money, they can always go to the ATM to withdraw more.” However, this is not the right understanding of how money works.

Children need to comprehend the fact that money will decrease when constantly used. This will make them understand the concept of savings. “When they know money is limited, they will start to learn how to spend within their means and how to make the best out of it by weighing the pros and cons of their financial decisions,” added Ms NG.

Parents often leave out financial education for their children because they have the assumption that everyone learns by making mistakes and therefore, they are comfortable letting their kids learn without guidance.

However, when it comes to financial issues, making a small mistake can sometimes cost a fortune. Parents should focus on teaching their children rather than reflecting on their past to avoid the same cycle with their kids.

 

“Most adults learned about money the hard way through committing costly financial mistakes as nobody ever taught them about money. Many parents perceive that financial education is just about knowing how to save and invest. Hence, they’re confident that their children have the ability to be financially sufficient and independent,” said Ms NG.

Ms NG added, “Knowledge alone won’t be much of help if children do not have positive money habits which is crucial to their financial success.” Habits take some time to develop, thus why it is beyond important that kids are taught about financial literacy from a young age.

As duly noted by Ms NG, “To build good financial habits and attitudes, it has to start from young so that the children have sufficient time to build good relationships and foundation towards money.”

Money Can Neither Buy Happiness Nor Life But It Can Ruin Both

We have always heard the popular phrase, “Money can’t buy happiness.” So we had asked Ms NG if financial literacy is linked to someone’s ability to manage their emotions, and they said that money can very much affect our feelings.

“Money can neither buy happiness nor life but it can ruin both if we do not manage it well. If we are constantly facing financial problems such as having too much debt, not having any emergency funds etc, it will adversely impact our mental health as the stress of handling these issues will make you feel depressed or anxious,” Ms NG explained.

What Young Adults Wish They Had Been Taught About Money When They Were Young

SchoolAdvisor also spoke to young adults who have just started their career after graduating from universities about their exposure to financial literacy when they were younger.

A TESL graduate and a teacher, Sara wishes she had been taught about school loans and debts in school. “I had no idea that we have to spend half of our lives paying school debt alone.” She said her life may have been different had she been equipped with the knowledge of scholarships and loans when she was in school.

Lily, who is currently working as a junior in the human resources department, wishes she had been taught taxation knowledge before venturing into the professional environment. While she had an idea about gross and net salary, she had no idea about where the deduction will go. She said it would have been better to learn about all of these beforehand.

 

Some schools in the United States of America have introduced financial literacy in their syllabus. In New Jersey, the state law has announced that financial literacy instruction should be taught to middle and high school students starting 2019-2020.

The principal of Roosevelt Middle School in West Orange, Lionel Hush has included financial classes at his school way before the state enforcement as he strongly believes in financial literacy for children.

The feedback that he received from his students is as expected. The children were having so much fun learning about money management and how they can incorporate this information into their daily lives.

Carly Urban and Christiana Stoddard in their report said, “Financial education decreases the likelihood of holding credit card balances and reduces higher-cost private loan amounts for borrowers.” This study explained the effectiveness of teaching financial literacy to students.

Moving forward, parents have to be more open towards money matters with their children by discussing money with them, planning together, providing them positive learning experiences and becoming good financial role models.

The national curriculum should also be revised to include basic financial literacy that students need in the future. Topics such as loans, debts, taxation are some of the topics that can be covered in the syllabus.

Financial literacy can greatly help with financial independence. In order to achieve that, financial literacy should be taught from a young age so children can navigate their financial path better while they are growing up.

To enroll your child to a financial education programme, please visit Little Tauke at www.littletauke.com 

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Planning Finances for the Education of Your Future Children