Financial literacy: how to teach children to manage money

Financial literacy is one of the most discussed topics in the media today. Everyone knows that money should work. But many people regret that they realized this too late and do not want to miss the right moment for their children. When to start and how to raise financially literate children? We will figure it out together with Brave Capital financial advisors Olena Nedoves and Vira Nedogoda.

Olena Nedoves

Financial Advisor Brave Capital

Faith Displeasure

Financial Advisor Brave Capital

It is advisable to start from preschool age (from 3 years old) and develop financial skills until adulthood, until the child becomes responsible for his own financial decisions and actions. But at the same time, you should always remember about the age characteristics, the character of the child, the situation in the family. And act without pressure and intimidation, but follow the path of support, love and mentoring. Remember that your personal experience will be the very first teacher for your child, because children tend to repeat and copy not what they are told, but what they see.

Financial basics for preschoolers

From the age of three, we can start talking to children about money and involve them in the process of choosing and buying goods. Take your child to the store with you, try to pay in cash, explain that each thing has its own value, and you can’t just take a candy bar from the supermarket shelf and leave. Give your child their first piggy bank, thereby encouraging your child to start saving. The older the preschooler, the more you can deepen the topic, but preferably in a playful way. Give your child “live” money – bills and pennies – so that from childhood they get used to their inseparable neighborhood with us in life. Immersing a child in the world of finance before the age of three may threaten that they will perceive money exclusively as a toy, a game, so don’t rush.

Junior school age and finances

When a child starts school, they usually have their first pocket money. And then comes the moment of their first independent financial decisions: to buy a first course, second course, and compote in the cafeteria or to spend all the money on chocolate bars, or maybe even give money to a classmate because he is "cool". At this stage, dialogue with the child is our everything. We explain, argue, prioritize. This is where financial discipline and independent money management skills begin to form. A first-grader can be given money every day, a fourth-grader - once a week, so that he learns to correctly distribute his money over five school days. It is worth talking to children about the first "big" goals (on a child's scale): buying an expensive toy, a console, a summer trip. This is how we teach children to set goals.

Source: Freepik

Adolescence and financial literacy

At this stage, it is worth involving children in family discussions about the pros and cons of certain significant purchases, as well as in the formation and management of the family budget in general. It is imperative to teach children how to use simple banking tools, such as cards, and to explain possible dangers and fraud. It is also worth talking about consumer loans, their pros and cons. If you invest yourself, share the latest news with your teenagers: what assets you have purchased, what commissions you have written off, what financial instruments you are studying, etc. This is a period when children begin to strive for greater financial independence, so control should be moderate, and advice should be appropriate. Try not to cross the line of privacy, but at the same time prevent your child from making serious mistakes in managing finances.

Where to get money for children?

Every family has its own financial situation, so parents can't always pamper their children with large pocket money. Where can they get money to save up and go towards their first children's financial goals? There are solutions, and there are quite a few of them. First, no one has canceled holidays and relatives: grandparents, godparents and others often give children money so as not to miss out on a gift. Older children can earn extra money during the holidays by walking neighbors' dogs or watering flowers while friends are on vacation. Today, children are extremely proactive: they blog, sell craft products, sell old things, etc. Some parents pay for good grades or help around the house, but it's the parents' decision whether to teach their child that housework is an opportunity to earn money or a simple family duty. There are many options, if there is a desire.

Source: Freepik

The topic of finances is extremely practical and useful. Teach your children by learning yourself. Be a worthy example for the younger generation, share your experience, knowledge and plans. Teach them to manage money from a young age, and when your children become adults, you will rejoice in their financial successes and be proud of your parental "work."