Nowadays finance is a widely discussed topic, because money is a resource that everyone needs. However, in order to properly understand and use this resource, the children should be taught from an early age what money is and how it is used. So that this knowledge could help them make understandable spending choices and not cause difficulties as they grow. But how to properly teach a child the essence of money and financial literacy?
As most children perceive the world visually, it is more effective to show how money works than to just tell them how it works. It is important to let your child see how you make purchases and, when you use a debit or credit card, tell them that you are using your funds to make purchases and not just show a plastic card. After making a purchase, it is also recommended to show the check to the child so that it is clear that each item has its value.
The children should have their own money, so that they can learn to make decisions about how to use it. It is important to teach that money is earned, not simply received, so it is important to involve a couple of specific tasks in the child's daily life, for which they can receive a symbolic reward. Of course, the child must also be made aware that there will be jobs, that will not be rewarded.
Making purchases is a pleasant process for most people, but the child should be made to understand that money is not just for spending. Learning to save is an essential habit that teaches discipline and helps them understand, that saving creates a sense of security and independence. Initially, it is better to teach the child to save for short-term goals, such as for a toy, in order to better understand the importance of planning and goal setting, and the toy purchased for the money they saved, will seem more valuable and important to the child.
As the child grows, their wishes and intentions change, and so do their spending decisions. Children must be taught to understand for themselves whether the particular thing they really want to buy will be worth spending or not. It is also important to explain that spending is not always buying the things you want, as there will be situations where the savings or earnings will have to be spent on things that will be simply needed on a daily basis.
As important as teaching your child to spend wisely and save money, it's important to pay attention to how you discuss and handle money when you're close to them. For example, if you talk about having to spend too much on certain things and then take your children to the store where you buy those things, you are unknowingly confusing them. If you want your child to have good spending and savings habits, they need to see that you yourself are also applying the knowledge you are teaching your child and that you’re also making smart spending and savings.
Educating a child about personal finances is a process that can take time, because not everything will be understood immediately. However, by patiently applying these recommendations to your child in an interesting and engaging way, your child will be able to understand the essence of finance.