For Parents: Strategies to Provide Children with Important Financial Advice
At Timo, we believe that financial literacy is an important topic that many children should begin learning at a young age. According to a 2018 study by FINRA, a foundation that works to help young Americans learn the skills to make reasonable financial decisions, over 53% of adults say thinking about their financial situation makes them anxious, while 44% say that the discussion of their finances are stressful. This study shows how much confidence young Americans lack in financial literacy and it underscores how significant of a problem this is. Furthermore, the study was conducted during a period of economic growth and declining employment — two factors heavily impacted by the current pandemic. It’s likely that these figures have only grown worse.
Everyday, adults deal with financial-related decisions whether that is buying a house, paying taxes, or raising a family and due to the lack of financial education in schools, they are forced to learn as they go through life and encounter financial obstacles. With this lack of knowledge, it doesn't allow adults to make reasonable financial decisions themselves since they are learning as they go along and, instead, they are compelled to hire an accountant or a financial advisor to advise them; however, this costs even more money and the decisions these financial advisors make for you may not always be what you wanted. Without the proper knowledge, adults are at risk of not being financially successful. Learning financial literacy is crucial to life because it allows you to make decisions that can benefit you financially whether that be how to make proper investments or what kind of prices and factors one needs to think about before buying a house. In addition, it saves you money!
Because of this, as a parent or guardian, it’s important that children are taught financial literacy at a young age in various forms, some being:
- Financial Discussions
Don’t be afraid to open up and be honest with your child about the struggles of managing finances. Talk to them about your own experiences with money and tell them the ups and downs. Try to consistently teach them about certain day-to-day financial concepts whether that be taxes, insurance, or loans. By doing this, it gives a sense of comfortability for your child regarding financial topics and, in the future, they won’t have that fear of feeling of discomfort when approaching you with questions about finance.
- Open a Savings Account with your Child
By opening a savings account, it allows your child to manage their own money. When it comes to birthdays or special events when your child receives money, they can then put it in their savings account and either save it or use it on something they want. This will allow your child to understand the value of money. It will teach them when to spend money and when to save. Also, another rule that can be enforced with this is making your child repay money if they borrow it. Although this may sound harsh, it will teach your child an important lesson, which is that in life, nothing is free. They will carry this lesson into their adult life and know how to control their spending.
- Financial Games and Literature
Despite the common notion that financial topics and anything regarding finance is boring, learning about finance can come in various forms. Games such as Monopoly or Cash Flow are fun, entertaining games that are very popular and easy to play. They’re also great to play with family and friends and so it will bring everyone closer together as well! In addition, there are many books out there that are dedicated to teaching finance to young kids and including If You Made A Million and Heads Up Money.
Providing a child the financial knowledge they require for future endeavors is a critical task to consider, as it allows them to be more prepared and smarter with their money. Eventually, they don’t need to struggle through the problems you once faced, hopefully lighting up a brighter future for you and your child.