Children and Financial Literary

Does your child receive an allowance or have a job and if so have you had discussions with them about fiscal responsibility? If your answer is no now is a good time to introduce your child to learning the value of money management whether they are 5 or 15. It will probably come as no surprise that there is an organization, the Paris-based Organization for Economic Development and Cooperation, which tests teenagers worldwide for financial literacy. The most recent findings found that globally only 1 in 10 teenagers had the ability to answer basic questions about loans, invoices and paystubs. As adults we probably take this knowledge for granted, but we need to share our experience with our children and help them be prepared for their own financial future. Our economic landscape has made it harder for young adults to obtain employment and the financial life skills learned in the process of working. I believe this has attributed to the lack of teenage financial know how, so it is imperative that families step in to help fill this gap.

When my children were young, I paid them an allowance for doing household chores and they often were able to work for a relative and earn money as well. What I discovered was that one child was a natural saver and another child found it harder to not spend what was earned. What the natural saver and spender had in common was a lack of knowledge about their options to open accounts at a financial institution, develop a budget and set short and long term goals. Once the children had savings accounts opened the spender and saver alike took great pride in watching the balances grow in their accounts. Another tool I used was to allot each child a certain sum for buying souveniers or gifts when we took vacations but this could also be done on routine shopping trips to any type of store. This system was used for an 11-year-old and 5-year-old alike. It is very interesting to watch a young child shop and compare prices and values and you will be amazed at how they often will decide they don’t need an item, which they might have asked for if the parent was paying for it. As my children got older I decided to take them shopping for clothing and give them the money I had budgeted per child letting them choose what items to purchase. I know many of you will say you fear your child could end up with no socks or underwear and 6 pairs of shoes but it is ok to watch and point out realities during the process. It is also acceptable to let your child make a mistake and learn at this age rather than in adulthood. My daughters both developed the insight that if they felt the least bit iffy about an item then they did not purchase it, as it would probably just sit in their closet.

Talking to a child about purchasing a larger ticket item is a good way to teach saving as well as goal setting. Any child wanting somethig as simple as a new basketball or bike to a computer, phone, first car, or specialized education can help pay for this item with planning and goal setting. Working on a long term financial goal also gives the child time to learn about comparison shopping, rebates and warranties, insurance and loan comparison for these items. If your child is not ready for this step yet then take every opportunity to discuss your purchases of large ticket items and your family budget with them. It is also very simple to share your knowledge of how you receive payment for your employment, verify it and pay your bills. Children have no concept of how to set up accounts for basic necessities like water, electricity and phone service; things adults do by rote. You will be amazed at how quickly most children gain the knowledge and skills needed to make good decisions. Experience is a great teacher.

 

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