Teaching financial literacy to our youth is crucial. It allows them to know the importance of money and in making the right financial decisions in the future. Children should develop good money habits before they become income earners.
Help children and young adults avoid negative attitudes when it comes to money. Financial management skills will serve as their weapons as they navigate through life. In addition, having a positive relationship with money will help them have financially secure lives.
Here are some of the benefits of boosting the financial literacy levels of the youth.
How Teaching Financial Literacy Empowers the Youth
Not having an understanding of money management creates a disadvantage. When it comes to money matters and opportunities, you can hurt your future.
Learning about financial matters empowers everyone by creating a stable and meaningful future. In addition, knowing the importance of credit scores will motivate them to look for the best financial options.
When individuals have the right financial education, they’ll know what steps to take when money opportunities come. Taking a loan for a large purchase like a home or car will be easier and have better rates. They will understand how to handle debt.
The Value of Money
Teaching your kids how to save and budget money is the first step to becoming financially responsible. As soon as your kids start talking, start teaching.
Give your children piggy banks and instruct them to set aside coins there and tell them the benefits of it. You can open a savings account for them when they get a little older. Have them set a goal to save their extra money and reap the rewards of it later.
When kids are young, you can teach them about debt by setting limits. For example, tell your child they can spend $10 and how everything after that is debt. Create boundaries so they will start to understand how to stay within their limits.
Soon enough, you can refer to it as a personal budget. Making debt an everyday topic in your home makes kids more likely to grow up with a healthy attitude about money. Not to mention invaluable life skills.
By the time they’re high school students, hopefully, you will have taught them how to earn money, save and invest. Having students learning financial planning should become standard curriculum implemented in lesson plans as early as possible.
Learning about money and its importance helps the youth avoid overspending when they become adults. Overspending is one of the factors that can ruin a person’s financial stability. Teach them about personal finance and focus on their needs – not wants – when spending their money.
Debt Management and Prevention
Teens and young adults should learn the difference between good and bad debt. The importance of avoiding bad debt or getting loans or credit cards that they can afford.
Bad debt is often charged to a credit card, spent on consumables, dinners out, drinks with friends, clothing you will wear once. Teach young people to stay away from bad debt. Pay cash for nights out and dinner with friends.
If you’re charging a retail purchase, make sure you have the cash in the bank to make your payment in full once the statement arrives. If possible, don’t take out loans or use your credit cards for unimportant expenses.
Good debt is often locked into a longer-term loan agreement with a much lower rate. Getting loans is only a smart choice if you’ll use the money for investment, building a business, buying a house. As long as the money that will help fund an activity that will further you academically or financially, that’s good.
Plus, you don’t want to take out loans or credit cards with exorbitant interest rates. Be smart when it comes to borrowing money, and choose a lender that you can trust. Many folks right now are in a debt trap because of bad financial decisions. So, teach your kids to borrow money only if they have the means to repay it to avoid the debt trap.
How to Build Credit
Having a good credit score is necessary to take out loans and credit cards with favourable interest rates. Therefore, teaching children about the concept of credit and the benefits of having a good credit score is a must.
First, show them your personal statement and explain it to them. This is something you can do when they’re a little older. It’s an excellent way to get young people to understand how credit card charges work. There is so much information available on your credit card statement.
For example, what your interest rate is and your credit rating. There will come a day when they get a statement in the mail, don’t make that the first time they see a credit card statement.
A credit score tells how creditworthy a person is. In Canada, credit scores range between 300 and 900. The higher the credit score, the easier it’s for a loan applicant to get a loan or credit card with a low rate. But, if the score is in the poor to below average categories, the harder it’s for the loan applicant to borrow money.
It Teaches Them How to Invest
Putting money on investments is a great way to grow your wealth. In addition, the youth can achieve financial stability when they learn about investment at a young age.
Investing is an excellent way to grow your money. Teach them the advantage of diversifying their investment portfolio. There are a lot of investment opportunities in which young adults can manage money. You can buy a home, build a business, invest in S&P 500 index funds, stocks, trust funds, etc.
Avoiding Money Scams
Financial scams and frauds are prevalent nowadays. That’s why it’s important to teach how to recognize the red flags. Help them avoid making poor financial decisions.
Instill in your children’s financial acuity and good decision-making. Don’t believe in too-good-to-be-true money opportunities. Before they invest your money in something, read reviews, complaints, and research about the company’s track record.
Teach Them to be Self-Sufficient
Financial education teaches the youth how to save, budget, and invest. In this way, they will become more self-sufficient and financially stable. They will have a good relationship with money. Know how to develop realistic financial goals for themselves when they become adults.
Teaching financial literacy to young people can help them over the long term. Making financially literate kids goes beyond the family. Parents, guardians, and the school system should teach the youth about personal finance, saving money, budgeting, investing, and other important financial matters. Imparting the knowledge and skills they need in the school curriculum will benefit everyone.
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