Children have a great capacity for learning, and it is essential to take advantage of this capacity so that they can learn to manage their finances from a young age. In today’s article, we talk about financial education for boys and girls, what it consists of, why it is important and how to teach it.
During the economic crisis that occurred in 2008, it was seen that many affected people had made bad financial decisions in the past due to a lack of training on the subject.
The data from the PISA report prepared by the Organization for Economic Cooperation and Development (OECD) shows that.
As a consequence of all the above, it is clear that financial education for boys and girls should be a fundamental element of their education and should be part of the study plans.
What is financial education?
Financial education includes a set of knowledge that helps to understand how money works at all levels (country, family and individual) in order to be able to manage personal finances correctly and have a good quality of life. Financial
education helps to avoid future debt situations due to a lack of knowledge.
To teach financial education to boys and girls, it is essential to know four basic concepts:
- Expenses. In order to save, it is essential that expenses are controlled and below income. It is about knowing what we spend our money on and reducing spending. It is also important to know the difference between debt that finances the acquisition of assets (which can generate a return) and debt that finances the acquisition of liabilities (for example, the purchase of a vehicle, which involves expenses such as gasoline, insurance, or repairs).
- Income. Income is usually made up of a salary received for work performed or income derived from self-employment.
- Savings . Controlling expenses allows us to save to be able to deal with unforeseen events such as unexpected expenses for home repairs, traffic fines or medical treatments.
- Investment. Savings, in turn, help us to invest in assets that generate a return that helps us overcome periods of crisis or that can be sold in the future once they have increased in value.
How do we teach financial education to children?
Children’s financial education depends not only on the knowledge they acquire at school but also on what they learn from their parents. Below, we offer you some tips to help your children learn financial education:
- Encourage the habit of saving. One of the first things you can teach children about financial education is the habit of saving. You can start with something as simple as giving them a piggy bank. To help them learn to save, help them set a savings goal (for example, buying a book they like) and create a savings plan to achieve that goal. This way, you will motivate them, and the effort of saving will have meaning for them. They will learn to be responsible and think about the future.
- Give your children an allowance so they can learn how to manage their money. One way for children to learn how to save is to give them a fixed weekly allowance, for example. With the allowance, the child will learn that money is limited, that they must prioritize, that they cannot buy everything they want and that saving requires effort.
- Teach them what money is. Children from a young age must know the value of money, that it is earned by working and should be used to pay for important things such as food or school. In addition, they must learn the four essential elements that we have detailed above: expenses, income, savings and investment.
- Explain to them the difference between necessary and unnecessary expenses. Children are like sponges when it comes to learning, so you should serve as an example to help them understand the difference between essential expenses, such as those for food, housing, school, or clothing, and unnecessary expenses, such as those for whims.
- Teach them to shop smart. Another thing you can teach your children is to shop smart and be responsible consumers. For example, you can help them understand that it is important to compare prices from one place to another in order to save money, or that they should not believe all the advertising, but should analyze each product carefully.
- Help them learn about financial education with apps. There are apps on the market that are focused on helping children learn about financial education, such as Life Hub, Banqer, or Goalsetter. These apps usually use games so that children can learn about financial education in a simple and fun way.
Financial education for boys and girls should be a fundamental part of their plans. Learning can be adapted to their age so that, for example, younger children understand the importance of money in life and how to manage it properly, and slightly older children learn to plan their income and expenses in the short and long term, as well as to analyse and understand financial risks.
