The concept of money today is very different from what it was 10 – 15 years ago. There is a remarkable shift from tangible cash to digital mode of payments. An increasing number of experts report it is more important than ever to start financial literacy in children as young as 7 years. These are a few reasons why you should start teaching your kids about money right now if you haven’t.
1. Financial Habits Form during Core Development
A recent study by Cambridge University in Britain found that money habits start forming as soon as core behaviors start taking shape. These habits are usually carried out into adulthood. You don’t want your kid entering adulthood with a wrong sense of financial responsibility.
Most children from the age of 7 realize the value of money. They understand the concept of in-app purchases and that money can get them things they want.
2. Planning Becomes Second Nature
Financial literacy for kids when started early helps them plan better. Kids understand the value of money and can analyze their needs against their wants better. They can plan their financial steps. For instance, your young adult may have their eyes set on a new video game. If they understand the value of money, they will automatically start saving and look for odd-chores to increase their allowance instead of pestering you to purchase the game.
3. Financial Literacy for Kids Encourages Delayed Gratification
Most children and few adults fall prey to impulse purchases. Something strikes their eye and they instantly want it. This can cause money troubles later on as wants and needs become more complicated. Kids as young as 5 years old understand the concept of saving. This helps in inculcating a behavior of delayed gratification.
4. Teaching Money Has Zero Risks
Many parents worry that teaching their kids about money and its alternatives would fuel miserly behavior. Some even worry their kids may mature faster than their peers, which may impact their cognitive development. These fears are baseless. Research from the University of Minnesota found that teaching kids about money at an early age could fuel rational development.
Teenagers that were taught about money from an early age could handle their allowance better. As a result, they understood the concept of delayed gratification and had a better chance at being satisfied. At the same time, not talking to your kids about finances could prove to be disastrous. In the early 2000s, the majority of young adults between the age brackets 20 and 24 filed for bankruptcy.
5. Early Financial Learning Leads to Sound Financial Habits
A study published in the Journal of Consumer Affairs found that kids that were taught to value money by their parents benefited in their adulthood. They became less inclined to make purchases on a whim and ensured that they always saved a portion of their income. The study also reported that these adults were better at tackling emergency financial issues as compared to adults that learnt the concept of money too late.