7 reasons early financial education is important for children. Learn why you want to take the time to teach your kids about finances from a young age.
written by Rebecca Lee
Financial education is a lifelong process. While the consequences of bad financial management are reserved for adulthood for the most part, it’s important to build a foundational set of skills early to help kids become smart and strategic with their money.
This, naturally, would mean teaching kids how to handle finances, as young as they are. Kids have a sponge-like ability to retain and remember information, which can turn their formative years into a great opportunity for parents to instill good financial habits.
There are multiple advantages to teaching your kids about finances at their age. From building lifelong financial habits to helping them adopt an independent and self-sufficient mindset, the perks of financial education can give your child a much-needed boost to succeed in the world.
That said, we’re not going to tout that teaching money matters to your child will be a breeze. For a lot of young ones, many monetary concepts will fly over their heads. Regardless, it’s critical to instill the right financial mindset in your child to make them a more prosperous adult.
Need more convincing? This article will lay out seven reasons why early financial education is crucial for your kid. Let’s start!
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1. It Helps Them Build Capital
Kids are, well, kids. They’re prone to making impulsive and rash decisions that may not be the best, money-wise. This is further compounded if you, as their parent, leave them to their own devices and fail to correct any bad habits they may develop during their younger years.
One habit that kids can overlook if not corrected early is saving. Saving money is an essential life skill that teaches discipline and delayed gratification. It’s about controlling the temptation of the present moment and instead working towards a milestone or goal set for the future.
Think about it: kids typically want things now, like a shiny new toy or a quick meal in a fast food chain. As their parent, you should prioritize setting your child up to be a good saver by teaching them to hold off on those desires and instead keep the money for something better later.
By teaching them this habit early, your kids can become more responsible money savers now and throughout their various life stages. In turn, this can help them build more capital, freeing you from making expensive purchases for them and helping them get what they truly need by their own actions.
2. It Instills Financial Discipline
Financial education can be complex and difficult to understand early on. But it’s an essential thing for young ones to learn and wrap their head around.
The good news is that there are ways to make the discipline a bit more digestible for younger minds. One easy concept that can be taught and learned by kids is the concept of budgeting.
Budgeting is all about tracking an individual’s income, expenses, and capital. It can be made to be complex for adults, but there are simplified templates that children can use to track their expenses. There are even smartphone apps like GoHenry that make it approachable.
Teaching your kid how to budget can be good for a variety of reasons, but the number one reason is that it teaches them how to be disciplined in tracking expenses. It trains the mind and allows it to be in control of impulses and desires.
Furthermore, budgeting also helps kids visualize where their money is going and the general status of their wealth. This information can help shape their financial decisions more effectively.
When done consistently, it can also help them become more responsible and independent decision-makers overall.
3. It Makes Them Value Money
No parent wants to set the precedent that money can grow on trees. Doing so can lead to children developing spoiled and entitled behavior—something no parent would want!
To prevent your kids from falling down this path, it’s important to teach your child about finances early on in life. Teach them that getting money isn’t easy. It entails hard work, discipline, and an ability to provide and contribute to society.
Try to get your child to do some chores around the house and reward them with some cash for their efforts. Make sure the chores are age-appropriate. You don’t want to give them money for all chores; instead, give it to them for bigger or new tasks.
You can also teach them to sell their old items and earn money from that, whether through a garage sale or an online marketplace. With the money that they’ve received from their labor, they can become more well-rounded individuals.
The fulfillment of buying something from their hard-earned money also sparks joy that’s incomparable to getting an allowance from you as their parents!
4. It Makes Them Goal-Oriented
Educating your child early in life about finances can teach them how to have a more structured and determined life.
This mindset helps them have a deeper sense of direction and a dream to work towards, which can help them live a life they envision for themselves instead of being lofty about it.
A good goal-setting technique you can teach your child is the SMART rule. This is a type of goal-setting technique that structures your goals to follow the principles of the acronym SMART, which is specific, measurable, achievable, relevant, and time-bound.
For instance, you can help them set a goal like “save $XXX to pay for two semesters of rent when I become a college freshman”. This goal ticks all the boxes of the SMART principle, which makes it much more realistic to achieve.
Of course, goals are highly individualistic by nature. They can also change as your child grows up. But by teaching them about the importance of finances early on, they can become more responsible and goal-driven individuals, considering that the vast majority of goals rely on money.
5. It Prepares Them For The Real World Sooner
It’s no secret that life’s riddled with challenges. From paying the bills to juggling a career and a family, there’s a fair share of hardships that most people struggle with once they enter adulthood.
That said, children don’t really shoulder this burden. They shouldn’t, too. However, it’s generally a good idea to remind them that life isn’t all rainbows and butterflies.
Teaching them about finances early on equips them with crucial and practical knowledge about how to handle the most important resource for most people: money. The concept of saving, spending wisely, and using debt smartly can be taught at an early age (although distilled to become more age-appropriate).
This readies them to the realities of the working world, which makes the transition to adulthood much smoother for them. It’ll also be beneficial to you as a parent as you watch your child grow into a financially responsible adult.
6. It Builds Decision-Making Confidence
Instilling self-esteem early in a child is something every parent should strive to do. This makes them more self-reliant and confident in their ability to perform tasks. And, teaching your child about finances early can help contribute to this increased feeling of confidence.
This increased confidence isn’t based on unfounded arrogance either. With proper education, you can teach your child to handle adult-like financial responsibilities early on, such as saving money and reducing debt.
This gives them a headstart in managing their finances and becoming more responsible and financially sharp individuals later in life.
7. It Reduces Future Financial Stress
Constantly worrying about finances can be mentally taxing. It’s a universal feeling that no one wants to feel the brunt of. However, for many people, it’s a reality they face daily.
If you don’t want you or your child to feel this stress, then you both need to be financially educated.
Teach your kids to save money and stop spending on mindless purchases. They’re using your money at the end of the day, so you should have the final say on how much you’re willing to tolerate from them.
By teaching them how to become more financially responsible, you’re helping them make less costly mistakes in the future. This not only helps you keep more money in your bank account, but it also helps pave the road for them to have more savings and not feel financially strained at all times once they become adults.
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