Financial Literacy is Necessary for a Bright Future!
Financial literacy is essential for success. That is a fact.
For any and all of us… We need to understand money and the cause and effect of our choices in order to make the right financial decisions. Our overall financial (and emotional) health can be tied to having strong money management skills. But where do they come from?
Have any of you faced this scenario?
You arrive at college orientation and there are tables smothered with credit card applications for students, just waiting to be filled out and processed. You get your shiny brand new credit card in the mail and you feel kind of baller.
You go out with friends and are a little looser with the purse strings… maybe a few extra days of lunch at a restaurant, that new pair of sneakers, etc. Then the bill comes. How did it rack up that quickly? You tell yourself “it’s not that bad, the monthly payment is still low”. Then you forget that monthly payment once in a while (it’s ok, I’ll catch up). But nobody ever told you that payment was interest only. And nobody ever told you how to manage this newfound credit windfall.
Fast forward a few years… you’ve graduated and landed a great job, but that credit card is still looming. When you are finally ready to look at a car loan or a mortgage, you come to the realization that your poor credit repayment history is now affecting your ability to borrow. Why oh why wasn’t this explained earlier!
As a lender, I have seen this scenario play out more times than I can count.
The solution is simple. Teach kids the basics of money management early. We need to help them understand personal responsibility with financial choices, cause and effect, planning, budgeting, smart spending and the importance of saving. These are concepts that can be learned as early as 5 years old.
In fact, one Cambridge University study found that children start forming their money habits by age 7. They learn early, so they need to be taught the right principles in order for good habits to form.
Kids need to learn money lessons that are as real life as possible, the kinds of skills that actually matter in everyday life.
So who’s responsibility is it to teach financial literacy to kids? The answer again is simple. It’s on all of us! Parents and teachers alike. The school systems are starting to come around. We are seeing financial literacy enter the scene and become part of the teaching objectives in the classroom. Great!
But parents, you are not off the hook. Kids learn money habits by watching. What they see and experience at home is a strong indicator for behaviour. If they see a parent that is loosey-goosey with spending, that is what they will emulate. If they see a parent that is extremely calculated with money, that is what they will pattern after.
The point is, we all need to step up and pay attention to this ever so crucial skill set. We teach reading, writing and math functions, both at school and at home. Let’s not forget that financial literacy is just as important, if not more so. Have the conversations with your kids, introduce them to money management.
I always say… it is the difference between your kids achieving the life they dream of or the one they settle for.