Are your children financially literate?
While teaching kids about financial concepts may seem like an early time to start, the skills they develop as children can shape their entire future.
Consider the following statistics:
- Children develop financial habits by the age of 7 years.
- Literacy, experience and behaviours encourage financial capability.
- The digital generation is suited to online apps and tools.
Preparing kids for future financial challenges begins with understanding earning, spending and saving money. Online apps and tools play a key role in creating this understanding and developing a brighter financial future.
Preparing kids for a better financial future has to start early. The more financially capable kids are, the better off they’ll be in the long run. Are you wondering when the financial education process should begin? Or what is the importance of using online apps and tools in the classroom and at home?
Here’s how to build a generation of Aussie kids that is money smart.
How Do Aussie Kids Measure Up?
Around 15,000 Australian students were tested in an OECD survey conducted on the financial literacy and application of 15- year olds. The study was aimed at evaluating whether these students were able to apply their financial knowledge and make decisions about money in real-life situations.
Students were asked whether buying a movie ticket would be a good idea if it would mean that they wouldn’t have enough money to pay for a bus home.
The students barely scraped above the average of 489 scoring a dismal mean of 504. What’s worse is that this performance has dropped in the last 4 years when the mean score was 526.
But what is really frightening is that the top score for all countries included in the OECD survey was only 566 out of 800.
Financial literacy has a direct relation to future financial prospects. It is clear that there is much work that needs to be done to ensure the financial stability of the generations of the future.
Literacy Lays The Foundation For Financial Capability
Being financially literate is key to understanding money. But it is only a small part of developing sound financial skills and capability.
Financial literacy is only the first step on the financial ladder. Basically, the difference between being financially literate and financially capable is knowing that we shouldn’t spend money on an expensive lunch every day…but doing it anyway.
Literacy is a base.
We need it to know what to do and what not to do. However, we must be able to apply that knowledge in order to make financial decisions. And learn to live with the consequences of those decisions whether good or bad. Experiencing consequences of applying financial literacy is where we learn future financial attitudes and behaviours with the final outcome being financial capability.
When Should We Begin Teaching Children About Money?
The latest research, as explained by hypnosis trainers Mindset Mastery, shows that financial habits are already developed by the young age of only 7 years. They explain “this only serves to highlight how important it is to start a formal education in finance as part of the school curriculum very early on.”
In order to create financially responsible adults, financial education must form a key part of the school curriculum.
Just as early behaviour can provide a model to later behaviour, explains rehab service provider Gold Coast Detox & Rehab, “the early introduction of financial concepts and providing students with the opportunity to apply these concepts while experiencing the consequences of their decisions are crucial first steps to providing a financial education too.”
How Can The Digital World Help?
Younger Australian generations have been born into digital environments and experience life and education through online apps, programs and simulations.
For example, opening a fake bank account and allowing students to earn, spend and save or even invest is a good start to financial education. Teachers can even simulate a mock economy to teach children about tax, personal finance, insurance and superannuation.
Some Practical Tips For Introducing Financial Literacy
The basic concepts of the value of money and exchange of money for goods can be understood from as young as 3-years old. Children are naturally curious at this age and will want to learn more about money.
It is critical to stress the importance of saving, budgeting and making sound financial decisions, explains hypnosis certifier Leonie O’Connell. She says “being open and honest about family, home and personal finances and how they relate to the values of the family and reasons why certain financial decisions are made provides an example for children to learn from.”
Some practical tips for teaching children about money include:
- Make cash purchases with coins and notes as often as possible rather than swiping or tapping a card. This creates an understanding of the link between actual money and spending.
- Make a spreadsheet of the household expenses so that kids are introduced to budgeting.
- Explain how money is moved electronically from your bank account to the account of a business.
- An old-fashioned piggy bank is a good way to teach saving. And can also be sectioned to include lessons about spending and sharing.
- Allow everyone to contribute to a family spending jar to save for a family outing, activity, vacation, etc.
- Get prepaid cards to give kids the opportunity to understand how a debit card works.
Create as many opportunities as possible to allow kids to apply their financial knowledge to develop strong financial capability.
Keep in mind that the best learning tool is often failure. Making mistakes is part of the financial learning process and will teach them the consequences of their actions.
Financial consequences for financial actions can either be positive or negative depending on the behaviour.