Financial Literacy month doesn’t take place until April, but there’s no reason you can’t start teaching your children the basic principles of saving and spending. So, what is financial literacy for students?
Financial literacy informs the choices we make for our personal finances, how we understand and contribute to the economy on a global and local scale, and having accountability for our choices as consumers.
The earlier our financial education starts, the better. According to the Consumer Financial Protection Bureau (CFPB), it’s more important than ever to set the stage for young children to learn simple economic concepts.
How Does Financial Literacy Impact Students?
Children need a wider range of skill sets to make informed decisions in an increasingly complex world. “There are even more ways to earn — and lose — money,” money mentor Miata Edoga tells Parentology. “Teaching kids financial literacy helps them avoid the pitfalls that trap many adults.”
Edoga advises that having solid financial literacy skills can help children to:
- Consider their financial choices, such as wants vs. needs
- Make educated decisions regarding everyday activities, from buying groceries to paying for tuition
- Develop skills with money management and budgeting, including paying bills, investing in financial products, and establishing credit
- Build lifestyles they can afford, avoiding the perils of sizeable credit card debt
- Understand how their economic choices impact their world on an immediate and global scale
Edoga urges parents to start as early as possible. “Even with young children, concepts such as delayed gratification and self-control can be established before introducing the concept of currency,” she says.
The US came seventh among 15 countries in the Programme for International Student Assessment (PISA) financial literacy survey administered by the Organisation for Economic Cooperation and Development (OECD) in 2015. The ranking falls just under the OECD average.
“The first place to learn about money is at home,” says Edoga. “Whether you’re eating together, grocery shopping or even making the grocery list. There are numerous teachable moments.”
Problems arise when we as parents are reluctant to discuss money matters with our children — or even among other adults. Money makes people uncomfortable. No one wants to talk about their bankruptcy, or how they live paycheck to paycheck, struggling to make ends meet. Children learn by example; if you’ve determined money should just be earned and not discussed, they will follow your lead.
“This is yet another opportunity to learn as a family,” says Edoga. “By not discussing money — how to save, where it comes from, how it’s earned – you’re doing your child a major disservice, and setting him up to have the same dysfunctional perspective. Use your discomfort as an opportunity to find the answers together.”
Among the most significant findings: students who have frank financial discussions with their parents tended to score higher. Similarly, students who held part-time jobs and saved money on a regular basis ranked among the highest in financial literacy.
“The earlier children handle money, the easier it becomes to view money as a tool for future rewards, not an instantaneous means to an end,” says Edoga. “Having a bank account at an early age not only gives them experience with financial products and services, it also gives them a sense of value, purpose and self-esteem.”