Many people commonly tend, through inadequate financial literacy, and consequent financial vulnerability, to make unwise financial choices. As a result, they expose themselves to the struggles of low savings, being unprepared for unplanned expenses, and high levels of debt. This demonstrates a significant need for education and guidance in matters of finance.
Of prime importance to prevent much of these adverse conditions in financial decision-making is to educate young children and teenagers about money. The earlier one starts, the better. Despite viewing ourselves as able to change and adapt, the quote, “Give me the child for the first seven years and I will give you the man…” (adult), certainly holds true in many ways. Instilling healthy habits early on in children both at school and at home, on how to handle money, and its value and its consequences, can go a long way to equip and prepare young people for financial matters later in life.
July is National Savings Month, and an excellent opportunity, in a period of instant gratification and ‘living in the now’, to teach financial awareness to our country’s young generations. Encouraging the skills necessary to promote regular and effective saving, is one of the most desirable buffers against many of the tolls that result from poor money-management.
As the number of Millennials (25-34 year-olds) entering the workplace grows, the lack of financial planning and understanding is becoming increasingly apparent. Unless we make a proactive effort to educate the youth, this trend is unlikely to improve. Children and teenagers alike need to be encouraged to think about what they ‘want’ and ‘need’, the difference between these, and how these things are procured and managed.
Children need to learn the basics, such as needing money to buy things. They also need to learn that they will not get everything they ask for – not money nor possessions.
Pocket money is an effective tool for financial education. Deciding on when, how much, and how often young children get their pocket money already gives them an idea of rules concerning money. For example, having to wait for a particular ‘pay day’, or having to save some pocket money to add to the next ‘pay day’ in order to buy a desirable item that costs more than their weekly/monthly allowance. This teaches patience and the value of money.
In addition, offering and negotiating guidelines on how much should go into saving, spending, and charity, exposes children to the principles of long-term planning and budgeting. Further to this, is the possibility of children getting more pocket money by doing chores over and above the usual duties around the home. This teaches responsibility, and that money is something not merely given to them, but earned.
While some of these rules may initially appear to be onerous, becoming accustomed to working with money can lend a degree of excitement and satisfaction when a goal concerning money is achieved.
Fostering favourable behaviour and consciousness in children regarding money, and encouraging them to save first, proportionately to their ‘income’, demonstrates that even a little can go a long way as the power of compounding takes effect. Instilling these principles, discipline and priorities in your child, will carry through to their adult working life and benefit them exponentially. It just takes practice, and if you haven’t started, why not get going?
Summa would like to thank Author, Rosalind Wuth, for her contribution to this article. LinkedIn Profile