The Importance Of Financial Literacy For Youth

Financial literacy isn’t something only reserved for adults. The ability to manage personal finances and make the right decisions regarding insurance, real estate, budgeting, investing and tax planning, is something that children and young adults should learn. With the amount of consumer debt increasing in Canada, your children should learn how to manage their money so they develop positive financial habits before earning an income as adults.

Financial Literacy For Kids

Most children have a savings account, yet possess no knowledge of how to use it properly. Teaching your children about interest and how it works will lay the groundwork for their financial literacy. If you have any trouble trying to explain personal banking to your children or do not know the best way how, you could set up a meeting at the bank and have them sit in for a discussion to help them understand the basics or look for some of the amazing free programs at your local library or look to the Financial Consumer Agency of Canada for a variety or resources and workbooks.

Why Learning About Finance Is Crucial For Young People

Whether your child gets their money from an allowance, or from a part-time job, it’s crucial that they understand how to manage their money. Showing your child how to save and budget their finances when they’re young will prepare them for the future. A great example is, if you have a teenager who has activated their first credit card, explain the importance of paying it off on time and how to keep their balance low so they’re not being exploited by high interest rates. It is also important to keep an close eye so that you can hopefully see the warning signs before their debt becomes unmanageable.

Lead By Example

Try to set a positive example at home of how you use your money. This does not mean you can’t make mistakes and have financial difficulties. Instead it is simply important to talk to your children about financial situations such as how you pay bills (even though they may not have any for quite some time). Show them how you break down your monthly income to cover everything from paying the cable bill to groceries. Removing the stigma of feeling like you have to keep your finances to yourself as well as the shame often associated with financial difficulties is an important step in helping your children learn, ask questions, and discuss their own financial problems fearlessly.

Explain The Difference Between Wants And Needs

It is important to impart to your children the difference between wants and needs and encourage them to have good financial sense. Explain that while they may want that new gaming system, they don’t need it, because their current gaming system works just fine. A good example to show them would be with your vehicles. You may have a 2011 model sedan and dream of upgrading to something more current, however, it is not essential because your current car gets you from point A to B successfully. Getting your child involved in these decisions or in planning a “no money” activity can be fun and will naturally reinforce good budgeting. Introducing them to cheap or free alternatives, such as all the e-content, movies, books, and activities available is your local library, can teach them good habits they can carry forward into the future.

If you show children the benefits of financial literacy in their youth, they will carry these lessons with them well into adulthood and stave off debt. Think of it this way, the more you teach them now, the less financially dependant on you they’ll be later.