Growth & Jobs | Teaching financial literacy early in a child’s life is important

Rose Miller, financial education consultant at the JN Foundation, says financial literacy is essential for children. She said teaching them how to become financially conscious at an early age will help them to understand the importance of saving and money management.

She posits that as early as age seven, financial literacy should be taught as this helps children understand the value of money rather than be overly frugal or extravagant.

“Our young children are like sponges, and their creative minds are constantly picking up new traits. Therefore, it is the best time to inculcate excellent saving habits,” she pointed out.

Miller explained that these saving habits should be ‘actionable.’ This requires parental involvement, with parents initiating the opening of savings accounts for their children.

The financial education consultant said that the opening of a savings account is a demonstration of a commitment to give children an early start to be financially independent. She added that what they learn about saving will benefit them later in life.

“Parents could start by purchasing a savings plan and guiding their children to save their spare change, which is always a good idea,” she advised, pointing out that “it will make your child less wasteful, and he or she will learn that any amount of money saved is always good for the future”.

“Teach your child the concept of disciplined savings by not letting him or her open the box until it is completely full and there is no room left. That money can then be transferred to their savings account at a bank,” Miller advised.

She noted that another strategy to encourage the savings habit is not to buy children everything that they ask for. If they want an expensive toy or game, encourage them to save up for it. This will teach them to truly value the effort to save and earn.

She also advised printing a picture of the toy that the child wants to purchase as it will motivate children and keep them focused on their financial goals.

“Set incentives for your child. Fix a small amount of money, which you add to their savings every time they save a specific amount,” she recommends. “For example, for every $200 your child saves, you could match it with another $200 to their savings. This will encourage them to save more as they will want to reap more rewards.”

Miller stated that parents can also take this a step further by making their children understand what investing money means. “As they achieve financial savvy, introduce them to real investment. Research for child-friendly investment schemes, which are relatively safer than other plans, and encourage disciplined savings,” she said.

She also pointed out that along with financial literacy, it is also important for parents to prepare financially for their children’s education.

“As you plan for their training, you should also put away savings for them to access tertiary education because a sound education will ensure that they are able to acquire wealth ‘by the sweat of their brow’,” she explained.

Miller also informed parents that several local banks have educational products that are geared at preparing for this stage of their child’s development.

However, Miller maintains that if parents were to plan for their children’s education from birth, fewer persons would need to access these loan funds.