You've probably heard of financial literacy, but have you ever thought about what it really means?
I was recently exchanging emails with an acquaintance who told me how confused she was because there is so much talk about financial literacy, but no one ever defines it correctly, nor does anyone ever help us teach it to our children. The growing concern of many parents is not only how to make them financially successful but also financially literate.
Being financially literate means making informed and effective financial decisions, including knowing when and from whom to ask for help.
Ironically, the education system rarely teaches our children how to practically manage income and spending.
Moreover, in today's technologically advanced world, cash is becoming invisible and talking about money is taboo for many families, leaving little room to answer our children's questions about day-to-day transactions.
On a positive note, one of the principles I particularly value in the education system in the country I live in, Switzerland, is self-reliance. And yet, while children are taught to be independent, direct and vigilant about external risks as they walk to and from school every day, there is no one systematically teaching them how to prioritize their cash spending.
True self-reliance comes when an adult and a child can understand the concepts of spending, saving and giving, so that they feel truly free and not just consumers.
Traditionally, as parents, we have encouraged our children to become educated through reading, writing, and shared conversation. Why not also promote financial literacy? By integrating general concepts about money, exchanges and values into the subject matter.
Being rich is not a prerequisite for financial literacy, nor is it necessary to be an expert in finance yourself.
It also does not mean that you have all the answers. It just means that you are committed to being honest about your intentions and financial resources, and know how to ask for help when you need it.
Most importantly, talk to your children about money in an age-appropriate way, be open and adopt the philosophy that learning how to manage money is far more important than how much money people have.
My job as a financial counselor to busy mothers is to help them become the best money role model they can be in their family and community and feel confident to raise financially secure and educated children.
Here are some basic principles to keep in mind on a daily basis:
Make money visible to children by using cash wherever possible.
Talk out loud about what you do & buy with your money your money and why
Maintain a positive or at least neutral language around money
Always focus on how to put money in, not how much money
There are various activities that can cultivate financial literacy in children by age from which you can choose.
Early years, 0 - 4 years old
Take children shopping with you and pay with cash wherever possible.
Play shopping at home
Read age-appropriate, strong books that introduce the basic concepts of money, saving and decision making
Consider creating a toy wallet with fake money
School age, 5-11
Promoting financial responsibility with a weekly cash allowance
Distribution of money received by children in jars Spend, Save, Share
Let them give you cash in shops
Play family board games that use money & teach basic financial concepts
Explain things you might take for granted - ATMs, debit cards, banks
Math: simple questions with money and real coins, counting savings
Ask your children simple questions about money and encourage them to do the same
Continue to read age-appropriate books with them that introduce the basic concepts of money, savings, values and decision-making.
Older children, 12-16 years old
Talk about needs versus wants
Increase monthly allowance as it corresponds to increased responsibility
Incentivize additional savings by matching contributions
Consider paying children to do work you would pay others to do
Encourage participation in start-up programs, sponsored events, garage sales
Consider setting up an online bank account and teach them how to use it together
Explain the concept of interest, budgeting and planning, goal setting
Maintenance- Continue previous work, especially talking about money, reading together
