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Financial Literacy: Crucial Element to Your Child’s Development

November 30, 2017 Useful Articles

Educating your children from a young age on the topics of budget and savings tools will provide them with essential financial skills for the future.

Financial literacy can be addressed at an early age. From the age of five, children are able to understand basic financial concepts such as value for money, prices or savings.

It is important for them to be familiar with these concepts to understand the economic system in which they live and interact with it to make sound financial decisions in the future.

Talk to your children about money

Your home is your child’s first learning environment. Have conversations with your children on the subject of money and teach them how to manage money efficiently. Start with introducing basic concepts and explain more details over time.

For younger kids, you can tell simple stories with metaphors to give examples why effective money management is important. Classics tales such as “the Cicada and the Ant”, “the three little pigs” or ”King Midas”, are great short stories to help little ones understand the basics.

Set a positive example

Children tend to repeat observed patterns, so the best way of teaching is to set a positive example. If your children see you acting responsibly with money, they will emulate a similar way of managing their finances in the future.

Involve kids in your day-to-day finances

Practice makes perfect. Involve your children in day-to-day finances by informing them about the family budget, expenses, and savings plans. Involve them in purchase decisions and ask for advice. This will help them to better understand the value of goods and differentiate between essential and non-essential items.

Teach kids how to manage expenditure

Children ought to practice saving money as well as organizing expenses, so that they can develop an understanding of their own styles and capability of money management. As parents, you can encourage your teenage children to take part-time jobs to have them understand the value of money and the efforts required to earn it. Alternatively, an age appropriate allowance, perhaps in exchange for doing household chores can also help to install a good work ethic.

Help children learn how to save and practice patience by saving up for what they want is also important. Or, help your child set a small budget in line with their savings, allowance or earnings, perhaps in relation to holiday spending or buying seasonal gifts.

Credits: Metlife UAE