As children get older, their capacity for learning increases, however when traditional teaching and education miss the mark, then educating children in the area of financial literacy should become a priority.
Traditional education aims to prepare children for a career path, but once they reach entry-level positions and start earning an income, are they ready for the responsibility that comes with earning an income? Do they have the necessary skills to manage, maintain and grow that income?
Furthermore, if they were to start their own venture, would they have the knowledge and understanding needed to manage their finances as well as the companies?
As the Young Entrepreneurs Foundation, we place great importance on financial literacy, especially in poor and previously disadvantaged communities, as we feel strongly about making sure the youth are financially literate. These lessons focus on money management which is universally applied. There are various other reasons why it is vital to teach children financial literacy.
Let’s consider these reasons, and the impact it makes on the lives of children.
1. Budgeting basics and financial literacy for children
Having financial literacy and learning financial responsibility starts and ends with the ability to create and manage a budget. As adults, the word budget is one we dread. Could this be due to the lack of education and skills development in the formative years? This could be entirely plausible. Consider what culture you will cultivate in a young child’s mind when placing emphasis on developing budgeting basics in children. Not only does it allow them to think about money more productively and efficiently but it will enable them to develop management skills that will not only help them with money management but project management as well.
Financial responsibility begins with a basic budget as it forces us to focus on our needs and not our wants. It requires children to think sensibly. This will have a significant impact on the lives of children as these are skills they will use in various aspects of their lives.
2. Being savvy means saving
Once children grasp the concept of budgeting by distinguishing between needs and wants, another vital lesson to instil during the formative years of a child’s life is the importance of saving and investing. Saving is an essential aspect of maintaining your financial health no matter what your income bracket might be. When running your own business or managing your finances, having the right balance between spending and saving is a good habit. Moreover, it gives you an added sense of security as anything could happen. “Money for a rainy day,” as the saying goes.
In our case when teaching a child the value of saving along with budgeting, this financial literacy helps foster an excellent financial habit within that child. This will go a long way in setting the child up to be a successful entrepreneur one day.
The reason we at the Young Entrepreneurs Foundation have such a great passion for educating children on financial responsibility is due to the dire need to increase the number of small business owners and entrepreneurs in South Africa.
If mathematics is a subject a child is comfortable with, then the basic concepts of financial literacy should be easy to grasp. In saying this, not every child will become an entrepreneur, business owner or financial advisor, but every child will need to learn how to work with their own finances thus making this universal lesson vital and essential to invest in. At least the child will have the best chance at a sound future.