Financial Literacy In A Cashless Society

12/18/2020

In our world, where money is exchanged electronically and cash is less visible, we are presented with new and exciting opportunities to teach children about finances. Known as financial literacy, these early lessons and conversations around money can help children develop financial concepts improving their ability to manage their money later in life.

Teach Kids about Money Early

Parents can set their child up for the future by establishing good money habits while young. Research shows that having weekly conversations around money, as early as age three, and modeling good money habits improves the likelihood of those children being smart with money.

There are some great opportunities to teach kids about money in your routine day-to-day activities. For example, going to the bank can involve a conversation around work and earning money; a trip to the grocery store offers the opportunity to talk about coupons and price comparison; even playing at home provides the chance to teach them about math and numbers.

Talking to your little ones about money on an everyday basis helps them become familiar with financial words and ideas. As they grow you can build upon their knowledge with more complex lessons.

Teaching Children about “Invisible” Money

Kids benefit from being exposed to situations where money is exchanged, but in a world where cards are swiped, and groceries and entertainment are bought online, they don’t often get to have these experiences. They may see this “invisible money” as an unlimited resource instead of real money coming in and out of their parents’ bank accounts.

Show children money and let them handle bills and coins while explaining its value and how you earn it. For older children, it may be beneficial to explain how you balance the family budget by differentiating between what you need and what you want. Starting these discussions early builds money management skills.

Benefits of Raising Financially Literate Kids

1. Increased confidence

Financial literacy gives children the assurance that they can make good spending decisions. They feel empowered knowing they have the tools and skills to handle, and better yet, understand their finances.

2. Saving for their future

Having learned from a young age about how money is earned and the difference between needs and wants helps children understand the importance of saving. Start with shorter term savings goals and budgets – like saving for their next birthday party – and slowly involve them in planning for their future education.

3. Using credit responsibly

Understanding how credit works, when you should use it, and the importance of paying off your balance are all part of a financial education that will benefit your child in the long run. Understanding that building good credit history is important in the future, especially when it comes to big purchases like a car or home.

4. Understanding the difference between need and want

Part of financial literacy is knowing that there is a finite supply of money. Being able to distinguish between wants and needs shows children they can prioritize spending, save more and enjoy long-term satisfaction.

5. Practise good financial habits

Saving a percentage of incoming funds, budgeting, saving for emergencies, planning for retirement, short-term and long-term financial goals; these are all good habits for children to develop and can set them up for a lifetime of financial stability.

Money concepts to teach at difference ages

To help you and your child on the journey towards financial literacy we’re sharing a few learning ideas and opportunities for three age brackets: 

Ages 3-5:

• Explain where money comes from and how you earn it
• Work money concepts into imaginary spending games, like store or restaurant
• Visit the bank together and explain what you are doing as you do it, let them press the ATM buttons

Ages 6-8:

• Open a savings account and talk about a long-term savings goal, like a new toy and experience
• Explain the differences between wants and needs
• Discuss the family budget and how you make purchasing decisions

Ages 9-12:

• Explain credit, debit and other complex financial terms
• Discuss the benefits of saving/contributing for post-secondary via an RESP
• Use their savings account to illustrate the concept of interest and how the bank pays people back for saving

For more information on saving for your child’s RESP’s contact Karen Wallace from Knowledge First Financial:

Karen.Wallace@kff.ca | KnowledgeFirstFinancial.ca/Karen.Wallace