Money management is not a skill that comes easily. It is acquired by direct experience and observation. Teaching kids to save is an essential first step in helping them understand the significance of financial literacy and how to handle money.
But it shouldn’t stop there. Savings accounts are a sure thing and a straightforward concept, yet they are sadly insufficient.
However, investing their hard-earned money is the only way they can really generate money since investments enable them to invest their money and make it work for them even while they are engaged in other activities.
This is true because kids possess a priceless gift: time. The rewards in the future increase the sooner your child begins saving and investing.
This is the outcome of the magic of compounding, which causes the rise of earnings via the addition of interest to a principal amount of the deposit. Money is generated each year from the profits of the previous year.
Parents’ financial conversations and financial actions convey strong signals to their kids.
Nowadays, Teenagers are growing up in a world where digital banking rules, “tap and go” and online buying are favored over using real, tangible money.
Continue reading as we discuss the value of financial literacy for youth, particularly for children and teenagers.
Ready for an emergency
Tommy Mello, owner of $100 Million company A1 Garage Door Service states: “Financially literate people are more ready for crises. By learning about financial literacy topics like saving or emergency planning, people may be ready for the unexpected.
Even while dealing with a financial emergency, such as losing a job or being hit with a significant unplanned expenditure, is never easy, the effect may be lessened by exercising financial literacy beforehand and being ready for anything.”
It gives them more power
You may have heard the phrase “Knowledge is power.” The same is true for monetary concerns. You will be more prepared the more financial knowledge you possess.
On the other hand, any young person is at risk if they don’t have the right understanding and information about money.
Why do we attend school? To study history, math, science, and other subjects? The solution is to give us more authority in those specific areas.
Similar to other subjects, financial education has to be prioritized. It’s important to educate young people about money and how it works.
Financial illiteracy produces grownups who are underprepared
Isla Sibanda, owner of Privacy Australia shares: “According to statistics, young individuals who never acquired a decent financial education grow up to be irresponsible adults, especially when it comes to money.
They often have extremely low credit ratings, little investment experience, and insufficient savings to purchase a property.
These actions go counter to what people who were taught money management as children would do. Simply because they had a solid financial foundation as children, these individuals are able to make wise financial choices as adults.
Young people might easily develop poor financial habits due to a lack of financial knowledge.
Young individuals who engage in bad financial habits like gambling often lack or have little financial literacy.
They are readily persuaded by others to adopt further bad financial practices. A person with a solid financial foundation won’t be readily seduced into engaging in risky pursuits like gambling and Ponzi schemes.”
It aids in their comprehension of the distinction between desires and necessities
André Disselkamp, financial expert and owner of Insurancy shares: “We understand the difference between what we desire (supersize lattes, a tropical trip, the newest phone) and what we need (food, a place to live, clothes).
However, it may be simple for tweens and adolescents to mistake a need for wants. You may aid children in learning how to balance needs and desires without incurring debt by educating them about money.
Older teenagers could wish to take a vacation with their friends, but if they have even a basic understanding of finance, they will see that this is a “want” that they may need to budget for and save money for.”
It teaches people the value of money
At some point as a parent, you’ve surely exclaimed, “Money doesn’t grow on trees!” The likelihood is that your kid will have to work for their money unless there is a trust fund in their future.
While younger children may make a few dollars by helping with housework, by the time they reach their adolescent years, many children begin to work for pay by performing odd jobs like babysitting, mowing lawns, walking dogs, and other little occupations.
Teaching financial literacy paves the way for making wise financial decisions today, which ultimately results in better choices with more rewards.
It demonstrates to teenagers the value of money
Kids may be prepared to comprehend the potential of investing and growing their money via compound interest by the time they are in their early teens.
Advanced financial literacy discussions may center on the characteristics of various investment options, such as lower-risk investments or higher-risk equities. Who knows, maybe your kids may retire before you if they make some wise investments with the money from their part-time jobs!
An RBC Practise Account is one method your adolescent may practice investing. Aspiring Wall Street bankers may practice buying and selling assets like stocks and ETFs, manage their holdings, and monitor their performance in real-time.
Additionally, don’t undervalue the influence of family game night. Playing timeless board games like Monopoly and Pay Day is always entertaining and may help kids understand the financial lessons you’re teaching them right now.
It teaches teenagers how to recognize fraud/scams
Saj Munir, a business owner states: “Teenagers are often online, which makes them susceptible to hackers who prey on children in an effort to get access to money (not that you need us to tell you this).
Teach your kids the value of keeping their account information and password secure to help them avoid online fraud. Additionally, warn them about clicking on eerie and suspicious links, even if they seem to be from friends.
A smart mindset is another important component of financial education in the real world.
Educate your children on the value of asking questions before making a purchase, such as “What is your return policy?”
Encourage tweens and adolescents to conduct some preliminary research before making a purchase, such as comparing costs and reading internet reviews, in order to assist them in making wise financial choices.”
