Why Financial Education Is Important for Young Children

Do any of you remember a lack of financial education in school? It wasn’t until much later in life that I truly understood the implications of debt and interest on savings.

When we talk about financial education, it is not just about exchanging money. The world is made up of numerous financial decisions, which can impact adult life. If a fully informed decision isn’t made, with things like a mortgage – this can have a huge impact on your life for several years. The burning question then, is why are schools not teaching children about something so crucial in daily life?

The good news

The good news is that as parents, we can teach our children about financial education. And the younger we begin, the better. Research tells us that a toddler’s brain is like a sponge and they are soaking up information at ages 4-5 years. Let’s take advantage of this learning period.

Let’s discuss why financial education is important for young children

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How you can go about teaching your child

Money relates to everything we do in life

After struggling financially for several years, we needed to have conversations with our little one about money. Naturally, we explained activities like visiting soft play, going to a cafe and having a meal – can cost money. And sometimes, adults need to weigh up the cost of something and possibly look for free activities to do instead. Luckily, we have a very outdoorsy child and she would be happy running around in a field. Children don’t need expensive activities. They simply want love and to spend time with you. The only issue in the UK is the weather. Sometimes it’s not fun to be outside, in the cold rain.

Explaining to a toddler why high-cost activities won’t take place

A perfect example of this is birthday parties. We’ve explained this year she won’t be having one, like some of her friends. Instead, we want to look for birthday family activities – with a smaller group and cheaper cost.

Normalising money conversations

We’ve all heard friends who say they don’t discuss money. Relationships break down because of differing attitudes to money. I want to impact the next generation positively when it comes to their mindset about money. By being honest about money, we get kids used to openly discussing what can be a tricky subject for a lot of people.

The difference between needs & wants

Let’s be honest, even as adults we struggle with this concept. A primary school-age child cannot yet comprehend the difference between wants and needs. But as a parent, you can start to teach them the difference.

Maybe start doing this when out shopping. A candle, for example, would be nice to have. But bread and milk are essential. We regularly tell our children when we don’t need to buy an item because it’s a luxury. If she wants toys, we use the technique of explaining we will the desired item to a wish list. And she might get this item for a birthday or Christmas. We do say yes to some things, but most of what young children ask for is naturally going to be a no.

Pocket money as a tool to educate

We give our little one pocket money each week, for completing age-appropriate tasks in the house. We then make it fun to decide on what to spend the money on when visiting shops and the supermarket. We provide choices about whether to spend the money.

The pocket money is a reward for helping with chores around the house, getting dressed for school in the morning and overcoming specific challenges and anxieties she might have. All rewards are linked to her self-development. We also let the little ones pay for things in shops.

Understanding bills and receipts

When she gets asked if she wants the receipt, she takes this. We explain all the steps to her. I hope this is teaching her about transactions and how they work.

Saving money

Our little one is still too little to comprehend saving. And at ages 4-5 years they shouldn’t be worrying about this yet. But ultimately, I don’t want her to have any worries linked to money when she is older. A large part of the education is providing knowledge, so her mindset will be positive when it comes to finances.

We have had situations where the little one will carry her pocket money over to the following week. this enables us to explain she could buy a more expensive toy the following week. If she still wanted to choose some of the toys on her wishlist.

Financial literacy will lead to a healthier life

Our recent period of financial difficulty, caused anxiety, stress and lasting damage. If I can prevent my little one from ever having to experience this, I will do everything in my power to equip her with the knowledge she needs.

We cannot always predict what challenges will come our way in life. And some of those challenges will naturally cause money problems. But equipping the youth of today with knowledge about money and building up resilience is the key.

Practical steps for teaching your child about money

Use technology: I don’t know about your child, but mine has a tablet and we’ve started signing up to apps where she can solve logic puzzles and it will track her progress.

There are so many resources out there to teach your child about money. Using technology can help provide a simpler explanation and communicate in a medium your little one will understand.

Open an account for your kids: there are so many kids’ bank accounts and ISAs out there – signing up for one and discussing it with your child, can help to facilitate conversations about saving money. And highlight the importance of setting financial goals.

Teach using day-to-day activities: Learning through play and helping with household chores, is the best way to teach your little one about the world.

Make a game of it: In addition to games on a tablet or phone, you can also create real-life games to play. We are starting with the basics of Monopoly and will work our way up to playing it properly.

Until next time

I hope you enjoyed reading about some of the tips you can start implementing to teach your little one about money.

Do you use any of these techniques?

Do you have any other tips to share? Let me know in the comments below, I would love to hear from you.