Cultivating financial literacy in the young minds of tomorrow
As we celebrate Savings Month this July, let us commit to raising a generation well versed in managing their finances, preparing them to confidently navigate the economic seas of adulthood.
While the thought of introducing complex monetary concepts to a young mind may seem overwhelming, studies from institutions like Cambridge University suggest that children as young as three can begin grasping basic financial principles.
By providing an early education in finance, we encourage monetary independence and responsible spending in adulthood.
Here are three critical pillars for fostering a future generation of financially savvy individuals:
- Decoding the value of money
A recent global asset management survey noted that 37% of parents avoid money-related conversations with their kids due to a sense of discomfort — however, to inculcate a healthy money mindset, children must understand its worth. For instance, if your child receives a cash birthday present, talk to them about what could be bought with that money — and what cannot.
Then introduce the concept of saving and how saved money can grow. Let them experience saving practically by storing their savings in a piggy bank or bank account, depending on their age. For younger children, secretly add an interest component to their piggy bank and show them how their money has grown. For older children, talk about the interest item on their next bank statement.
- Understanding instant gratification versus delayed reward
Parents can use storytelling to illustrate the merits of delayed gratification over instant pleasure. Consider introducing books like Foord’s More than Enough and Little by Little, which offer excellent savings metaphors.
In the former, a squirrel named Anele, along with her mother, collects acorns not just for the approaching winter, but for the many, many years ahead.
In Little by Little, Anele learns the crucial investing principles of patience and the passage of time. By visualising these stories, children begin to understand the consequences of not saving for the future.
Try to motivate your children by setting attainable saving goals. If they set their eyes on a meaningful purchase, co-create a roadmap that sets out the path and duration needed to achieve the objective. Regularly revisit this plan to keep their motivation alive.
- Demonstrating effective financial behaviour
Children often mirror their parents’ habits, and this holds true for financial behaviours as well. Make sure that your own spending patterns reflect the principles you wish to pass on to your offspring.
For older children, consider involving them in family financial discussions. This practice not only demystifies the concept of money but also gives them insights into the rewards of diligent work and planned expenditure.
Remember, if you allow your children to control their own money, you also give them the freedom to make money-related mistakes. These mistakes serve as invaluable teaching moments for imparting lessons on future financial prudence.
4. Addressing financial literacy
To assist with cultivating financial literacy in the young minds of tomorrow, Foord Asset Management created their Teach Your Child To invest initiative as they understand and recognise the need to address the lack of financial literacy among young children.
Through their series of children’s books, which currently consists of “More than Enough” and “Little by Little”, they aim to teach young children the basic concepts of investing.
These books serve as the perfect platform for parents, caregivers, and teachers to initiate conversations about investing and, more importantly, to have ongoing conversations that explore various important concepts such as time, saving, income generation, compounding, diversification, risk, patience and investing for the long term.
These concepts are not only related to investing but also valuable life skills. For further details on this subject matter please click here.
