Financial literacy is one of the greatest gifts you can give your children as it helps set them up for success. Many schools fail to offer courses educating young people on this essential life skill, which is why it's so vital for parents to impart upon their children a strong understanding of how their financial decisions have a significant impact on their lives and futures. The sooner you can begin introducing the concept of proper money management, the better your child's chances of becoming financially independent once they reach adulthood.
What Is Financial Literacy?
Financial literacy is the ability to utilize skills and understanding to manage financial resources effectively. If you can teach this concept to your kids at an early age, it sets them up for success in the future.
How Does Financial Literacy Impact Kids?
A 2015 study by the Financial Industry Regulatory Authority (FINRA) found that children who are taught financial skills before entering college or the workforce are more likely to grow into adults who achieve financial success and security. It's easy to see how teaching life skills like budgeting, saving, and the concept of investing can have an immense impact on the financial success our children have later in life.
As parents, it's our job to set a good example for our children, and teaching them how to manage their money effectively is one that they will take with them for the rest of their lives. Many adults find themselves overwhelmed with debt, and some never pay it off; teaching your kids financial literacy can help them avoid overwhelming debt or show them how to successfully pay it down should they have it.
Financial literacy also shows kids how to have a good debt to income ratio, so they can build credit and have the high score necessary to purchase homes, cars, or other large expenditures. When children understand financial investment risks from a young age, they can make informed decisions and avoid costly mistakes once they enter adulthood.
What Can I Do As A Parent To Help My Child With Financial Literacy?
First and foremost, setting a positive example of financial management is the best way for kids to understand how important financial literacy is. Planning and saving for your child's education is also an exceedingly important aspect of living the example of financial literacy and is one of the best gifts you can give them.
Starting small and building as they grow helps even the youngest child understand how their financial choices affect their lives. The sad truth is most kids don't enter adulthood ready to manage their finances, so guiding them and teaching them as they age sets them heads and tails above the rest. Financial literacy is an essential tool for kids to become financially independent adults. The better they budget when they're young, the easier their financial futures will be once they reach adulthood.
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