Financial literacy… It’s almost beginning to be a “catch phrase” in today’s society. Everyone is talking about it, but what are they doing to help it catch on? What does it mean? How do we promote financial literacy to the youth of today?
Investopedia defines financial literacy as “the possession of knowledge and understanding of financial matters”. It describes it further saying “it entails the knowledge of properly making decisions pertaining to certain personal finance areas like real estate, insurance, investing, saving, tax planning, and retirement.”
Financial education should be life-long; beginning with parents in the home, continuing through elementary and high school and persisting into adulthood.
If you are at this point, you deserve a gold star for listening (or reading)! Here’s why: I have done many presentations to students from grades 9 to 12 in the past few months and the one common trend I see in these classrooms is the lack of interest in the topics around financial literacy. One question I always ask the kids is “Can anyone tell me what a credit card is?” The answers to this question have proven to be very alarming and at times, comical. These kids are 16 to 18 years old and can’t confidently tell me what a credit card is let alone how it works! I can’t help, but ask… How can we expect these youth to be responsible with a credit card in a few short months when they are able to sign for their own card?
Starting at home can be the easiest and most effective way to introduce personal finance as well as the financial concepts required to give kids the knowledge and confidence to be smarter consumers into their teens and adulthood. I have broken down a small list of ways to help kick start these life skills at home. Try some of these out, your kids (and their financial advisor) will thank you!
- Be a savings role model.
I’m not sure if you have noticed or not, but kids are so good at copying behaviour! Sometimes it’s easier to focus on the bad habits but they do pick up on the good habits too. Use jars to organize your household finances – divvy up the money required for groceries, gas, utilities, and entertainment to help the kids relate to the money and to see how much it costs to keep the fridge full!
- Pay your kids cash… cold, hard, cash.
I’m guessing you already give your kids an allowance, right? Give them the cash to earmark for either spending or saving. Give them a special jar or piggy bank for savings and a cool new wallet for their spending money.
- Use the 10% rule.
Teach them to split that big birthday cheque from great-grandma and immediately take 10% and put in their piggy bank to save for the future.
- Start saving early.
From their first allowance to the time they move out. Talk about their savings and be firm with goals they have set for themselves!
- Come on Dad… give them some dough!
One sure-fire way to encourage saving is to match their savings effort. Jimmy is saving for his first car, challenge him to save at least half; if he can reach his target you’ll give him the same amount.
- Post pictures of the savings goal.
There is nothing that makes you more motivated to save then staring at that new bike you really want! Post pictures to the fridge, bulletin board, or even the background of the computer and iPad!
- Measure progress and give rewards.
Create a colourful savings chart for long term savings goals. Reward progress with stickers, screen time, candy, time with friends, or even a later bedtime!
- Teach financial concepts.
Such as compound interest, credit cards, consumer rights, and cost of credit. These are important concepts that will ensure your kids are fit to make their own financial decisions and be a responsible consumer.
- Introduce banking.
Take them to meet with a financial expert at the local financial institution (like the Credit Union) to open up their very own savings account. Let them have a discussion and build a relationship with the financial expert, this will be a valuable relationship for all three of you!
- Don’t forget the fun, Mom!
By no means will these steps be easy, but you can use some fun to make it a bit more interesting! Use board games, challenges, online apps, fun videos, or other fun activities to encourage your kids to learn and grow their knowledge.
By using a couple of these tips, I hope you are able to help your kids feel valuable in your household, and give them the power to go out on their own and be financially healthy. By investing in your child’s financial knowledge, you can be sure it will have a life-long impact on how hey look at their own finances and they will be more likely to make smart decisions in the future.
Naomi Seaborg, Conexus Credit Union