Financial literacy is a crucial life skill everyone should acquire, and it’s never too early to start teaching it to children. While the education system does include financial literacy as a component of education, we cannot rely on it alone. One of the fundamental aspects of financial literacy is instilling the value of saving, something passively discussed in school. In this post, we will explore the importance of financial literacy for kids, with an emphasis on teaching children the significance of saving money.
Building a strong foundation
Financial literacy is like a strong foundation for a house. It provides stability and support for future financial decisions. When we teach children about money from an early age, we equip them with the tools they need to make informed choices as they grow older. Saving is a fundamental building block of financial literacy, as it encourages kids to develop responsible money habits from the start.
Saving money teaches children the concept of delayed gratification, an essential life skill. It helps them understand that by patiently setting aside money today, they can achieve bigger goals in the future. As parents, we could set up a virtual piggy bank as we all save towards a common goal. For example, a vacation. Demonstrating that saving now means fun later.
Teaching kids to save also prepares them for unexpected expenses or emergencies. Having an emergency savings fund teaches children that life can bring surprises and that having financial resources set aside can provide peace of mind. In an age-appropriate way, talk to them about your monthly expenses, what you would do if one parent broke their leg and couldn’t work for a short time, or how savings can help if the car breaks down.
Saving money involves setting goals, which is a valuable life skill for children to develop. When they have a specific purpose for their savings, such as buying a bike or going on a special trip, they learn how to set realistic objectives and work towards achieving them. This goal-setting ability can be applied to various aspects of their lives as they grow.
Teaching children about savings instills a sense of financial responsibility and helps them gain a deeper understanding of the value of money. Kids learn they are accountable for their money, there are consequences for saving and spending, and that they should manage money wisely. This lesson paves the way for responsible budgeting, saving, and investing practices as they become adults.
Investing Their Money
As our children get a little older, it is important that we teach them about the various types of financial products out there to help them save. What is ‘compound interest’ and how is it calculated? How much will it grow if they deposit $10/month for a year? If they have a larger sum of money already saved, are there better savings tools, like Term Deposits, they should consider? Take your child with you to the bank and have a conversation where they can ask questions and make informed decisions to reach their savings goals.
Setting a Positive Example
Children often learn by example. When parents and caregivers demonstrate good saving habits, they are more likely to follow suit. It’s important for adults to model responsible financial behaviour and discuss their own saving goals and strategies with kids.
Financial literacy is an invaluable gift that parents and caregivers can give to their children, regardless of our current financial status. The earlier we start teaching our kids about the importance of saving, the more likely we are to succeed in developing financially responsible adults. Financial literacy empowers children with essential life skills such as delayed gratification, goal-setting, and financial responsibility, setting them on a path to a financially secure future. Start early, be a positive role model, and help your children understand that saving money isn’t just about dollars and cents; it’s about building a brighter future.