The Benefits of Teaching Financial Literacy to the Youth

By on November 18, 2020 No Comments
Boy And Elderly Grandfather Putting Coin Into Piggy Bank Talking About Value Of Money

Teaching financial literacy is important. And it’s wrong to think that financial literacy should only be taught exclusively to adults. Teaching kids financial literacy is also crucial because it allows them to know the importance of money and in making the right financial decisions in the future. In light of the ever-expanding consumer debt in Canada, the youth should learn how to handle money and develop good money habits before they become income earners.

Teaching financial literacy also helps children and young adults to become less impressionable of the negative attitudes of some adults when it comes to money. Financial management skills will serve as their weapons as they navigate through life. Having a positive relationship with money, they will increase their chances of having financially secure lives when they become adults.

So, financial literacy for kids is a must. Here are some of the benefits of boosting the financial literacy levels of the youth.

Financial Literacy Empowers the Youth

If kids and young adults in high school possess a lack of financial literacy, they can’t understand investments, interest rates, loans, savings, or budgeting. If this is the case, they’ll be at a disadvantage when it comes to money matters and opportunities.

Learning about financial matters empowers the youth because it’s one of the ways to lead a stable and meaningful life in the real world. If they know about the importance of credit scores, how interest rates work, and the different types of investments, they’ll be more motivated to look for the best financial options available for them in the future.

When individuals have the right financial education, they’ll know what steps to be taken when money opportunities come. For instance, when they start their investing journey, they’ll know the advantage of diversifying their investment portfolio and other investment strategies.

It Helps Them Understand the Value of Money

Money is a valuable resource. The youth should know this fact at an early age to avoid unnecessary spending later in life. Teaching your kids how to save and budget money is a stepping stone for them to become financially responsible.

For example, you can give your children one piggy bank each and instruct them to set aside coins there and tell them the benefits of it. You can also open a savings account for your children so that they can save their extra money and reap the rewards of it later.

Learning about money and its importance helps the youth avoid overspending when they earn money as adults. Overspending is one of the factors that can ruin a person’s financial stability. Teach them about personal finance and how to prioritize their needs – not wants – when it comes to spending their money.

It Prevents Them from Having Too Much Debt

Teens and young adults should learn the importance of avoiding debt or getting loans or credit cards that they can afford.

If possible, don’t take out loans or use your credit cards for unimportant expenses. Getting loans is only a smart choice if you’ll use the money for investment, building a business, buying a house, or emergency purposes. As long as the money you borrow serves your financial goals, 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 for them to avoid the debt trap.

Girl with a piggy bank

It Teaches Them How to Build Credit

Having a good credit score is a must to take out loans and credit cards with favourable interest rates. So, at a young age, teaching children about the concept of credit and the benefits of having a good credit score is a must.

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 obtain a loan or credit card with an advantageous rate. On the other hand, if the score is in the poor to below average categories, the harder it’s for the loan applicant to borrow money.

So, what are the factors that can boost or drag down a credit score?

  • If you pay your bills and debts on time, there’s a high chance that you can increase your credit score and doing the opposite lowers it. So, solid money management is crucial to achieving this goal.
  • You also need to keep your credit utilisation ratio low to improve your credit score. For example, if you have a credit card, you should not max out your available credit to maintain your credit utilisation ratio low. It’s recommended to keep your credit utilisation ratio at 30% or less.

It Teaches Them How to Invest

Putting money on investments is a great way to grow your wealth. The youth can go far in terms of financial stability when they learn about investment at a young age.

Investing is an excellent way to grow your money. There are a lot of investment opportunities in which young adults can put their money. You can buy a home, build a business, invest in S&P 500 index funds, stocks, trust funds, etc.

It Helps Them to Avoid Money Scams

Financial scams and frauds are prevalent nowadays. That’s why adults should teach the youth to recognise the red flags and prevent making poor financial decisions.

Instill in your children financial acuity and good decision making, especially if there’s money involved. Don’t believe in too-good-to-be-true money opportunities. Before you invest your money in something, read reviews, complaints, and research about the track record of the company.

It Enables Them to Become 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, and they can develop realistic financial goals for themselves when they become adults.


Teaching young people about money and good financial habits can help them over the long term. Imparting the knowledge and skills they need in school curriculum can build financially literate adults. Parents, guardians, and the school system should teach the youth about personal finance, saving money, budgeting, investing, and other important financial matters.


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