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The Importance of Financial Literacy and Teaching the Value of Money

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Money is an essential part of everyday life. The ability to earn money is what drives people to choose a career and the amount of money a person earns usually determines a lot about their lifestyle. Money is necessary to buy things that are needed, like food, and wanted, like new shoes. From a very young age children are likely to be aware of the presence of money and the impact that it has on the lives of the adults around them. For example, any child who has ever ventured into a grocery store with his or her parent has seen the adult pay for items at the cash register. Likewise, even very young children are likely to be familiar with credit cards and cheque books and know that banks contain money. However, what many children do not understand is the value of money.

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Financial realities impact the lives of nearly everyone. However, too many students emerge from schools largely uneducated about finance even while they are forced to learn math such as calculus, which is useless to the majority of the population. Very few people will ever use calculus on a day to day basis in either their careers or their personal lives yet calculus is a subject that is, nonetheless, commonly taught as a “core” requirement in curriculums. Meanwhile, studies of finance are not required and, in most cases, untaught.

Ignorance of financial matters is a serious problem among the current population and this, in part, is why there has been an influx of credit crises in recent years. Even more disturbing is the tendency for children to learn their money management skills from their parents. This essentially suggests that children who grow up in monetarily unstable households are likely to repeat the same problematic patterns and create a cycle of bad financial decisions which can have profoundly negative effects on numerous aspects of their lives. Needless to say, children must grow up knowing basic facts about money since such knowledge will better their chances of attaining lifelong financial security.

One of the simplest ways that parents can help promote their children’s financial literacy is to provide them with an allowance. An allowance is a certain amount of money that parents are willing to give to their children every week or month. A child should be told that they can spend their allowance as they wish—but the dire importance of saving money should always be stressed. Even young children can be taught to manage their allowance, such as keeping track of how much money they spend and maintaining an idea of approximately how much money is their piggy bank. By simply teaching children how to be mindful of their money a deeper lesson in responsibility is instilled within them and this heightens their chances of making wise choices as they grow up.

Fortunately, the Internet has made it easy for parents to find resources about finance that are appropriate for a wide age range. One of the best resources online is www.moneyasyougrow.com which displays a chart that breaks down, step by step, exactly what children of differing age groups should know about money. The website also suggests several methods for explaining each of these lessons in age-appropriate ways. “Allowance Manager” is yet another website that offers a system—both for computers and via app form—that helps children monitor their allowance in a comprehensive way. Noting that most people currently do a lot of their banking—and shopping—online Allowance Manager is a good introduction to handling money virtually: http://info.allowancemanager.com/

By simply incorporating these facts into education, parents do much to benefit their children’s future financial prospects and that is an incredibly important and worthwhile endeavor.

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