Financial literacy begins in childhood
If financial literacy begins at an early age, it can play an important role in helping children make effective financial decisions in the future. Economic competence was defined in 2012 by the OECD as "the combination of perception, knowledge, skills, attitudes and behaviours necessary to make sound economic decisions and, ultimately, to achieve individual economic well-being".
This definition was recognised by G20 leaders around the world in 2012. Financial literacy isn't just about knowledge relating to money. It's about our whole attitude towards money, what we think of it, how we feel when we ask for it, how we save it, how we spend it, or how we invest it.
Children who receive a financial education early on are less likely to find themselves in an emergency situation or in debt. Instead, they learn from early on how to secure a surplus that will help them fulfil their educational, career, or later family life goals.
Therefore, financial literacy is as valuable for children as it is for adults.
At what age can Financial Literacy begin?
Although few are experts in finance, as adults we've all developed some skills in managing our daily transactions. These processes that have accumulated from years of experience can be a first lesson for children.
You don't have to wait to be in the perfect financial situation to educate children about the use of money. After all, we set an example for them without realising it on a daily basis and they usually copy our behaviour. Children can be taught how to organize and allocate money through everyday life situations, such as the weekly grocery shopping or a going on a trip.
Consistent and structured guidance can train children in age-appropriate economic concepts and practices.
10 ways to discuss money with your children
1. Show them the coins and banknotes you have in your wallet and count them together. Point out the different sizes, colours and numbers so that they become familiar with the different coins and banknotes used.
2. Talk with older children about various payment methods: cash, debit, credit or prepaid cards, both contactless or by typing a PIN, via mobile, or through Digital Banking. Explain the advantages and disadvantages of each payment method and help them get acquainted with simple banking transactions.
3. Talk to them about how the family's income is earned. Older children can also understand how and why deductions are made from our gross income and what their purpose is.
4. Discuss how financial decisions are reached in the family, the budget, and the obligations that need to be covered for all members.
5. Teach children the difference between need and desire. Try to make them understand which goods we need every day, such as food and clothes, and which we don't, such as items or toys that may not be necessary. Point out situations and activities that bring us joy without costing anything, such as playing with friends or taking a walk in the countryside.
6. Teach children the concept of saving. As conditions are bound to be demanding at various points throughout their life, help children become familiar with the concept of saving and develop the habit early on that will prove very useful in the future.
7. Take them along when you go grocery shopping and teach them to look for better deals, as well as how to choose products wisely.
8. Don't forget to point out how important it is to keep our personal data safe and how risky it is to share passwords or PINs with others.
9. Involve children in decisions related to various types of expenses, such as buying a new laptop or a new TV. Ask them to come with you to a store to buy the products together or help you search for a better price online.
10. Finally, familiarize them with household expenses such as utility bills, and encourage them to discover ways to save, based on the abundance of information they have access to on the internet.
Financial literacy as a way to develop children's skills
It’s unfortunate that in Greece children and young people are not equipped with specific knowledge and tools to develop their skills in the field of financial management at the school level of education.
This gap makes it all the more important that financial literacy start in the family environment, promoting well-being and healthy decision-making for young and older members in the complex environment of modern society.
Children can and should acquire a positive attitude towards money from an early age, be confident in its use, develop the ability to plan and save, and understand basic, financial matters that will be useful to them throughout their lives.
Link: Financially Empowered newsletter