Without an understanding of how money works, it is difficult to prosper in life. In the United States, an animated character called Sammy Rabbit was created to Help children understand their first financial concepts.
Sammy’s co-creator, Sam X. Renick, explains that Money is one of the central elements of daily life transactions, which we use almost daily. “Where we live, what we eat, the clothes we wear, the car we drive, health, education, parenting, gifts, vacations, entertainment, heating or air conditioning, insurance! Everything works with money”.
Still, not many parents are making their children financially literate. In 2019, the annual survey Parents, Children and Money, from investment firm T. Rowe Price, found that nearly half of US parents surveyed admitted they don’t use opportunities to talk about finances with their children. A quarter of them confessed that they have little or no intention of raising the issue.
Instead, half of the children surveyed said they wish their parents taught them more about money.
The question, says Cameron Huddleston of the magazine Forbesis that Something similar happens with money as with emotions or sexuality or violence: if you don’t take responsibility for teaching, they will learn in other ways, away from home. “If you want to have a decisive role in how your children feel, think and handle money, you must give them the gift of early money literacy.”
Four basic concepts to teach children about money
The economist Jorge Calderón Salazar believes that there are four basic concepts that children need to learn: income, spending, saving and investment.
And this is not just numerical knowledge, but ethical. “Children need to know how money (income) is generated that allows them to cover their needs through the purchase of goods and services. It should be clear that it is the product of an effort made by the members of a household, and that is not obtained by handouts or gifts. It is the result of a lawful exchange (transactions between people or companies); and with that income an expense is made, to cover needs such as food, health, education, entertainment, mobilization, or any other that the person or family has”.
Calderón recommends that parents explain that not necessarily all income must be spent, but rather determine what immediate needs must be covered and leave a percentage for savings, which will allow solving needs or emergencies in the future; for it it will be important that savings have a purpose and temporality. The investment, on the other hand, will allow the child to have an initial knowledge of the concept of the medium term and the difference with savings.
María Lourdes Garaicoa Burgos, commercial manager of FuturFid, agrees with this point of view. “We must start with teach the value of money, that is, how it is obtained. The effort of our work is paid with money, and the more specialized it is, the more we will receive, that is why it is important to study and prepare. Then we are going to exchange the money earned for goods or services, which we must spend in order of priority. First the basic necessities for life, such as food, shelter, education, health, and later goods or services that allow us to have a better lifestyle”.
Show your children how the family assets are obtained, and point out that sometimes, to buy certain assets, they will need to save up enough money to buy them (or pay a down payment, depending on the asset). In the same way, point out to them that it is also important to have savings in the face of possible inconveniences such as unemployment, illnesses and losses, Garaicoa adds.
The economist Katia Rodríguez, an expert in the area of finance, also shares a list of concepts: savings, investment, profitability and indebtedness. “It can be explained to them with family finances, with everyday household cases: save for a trip, invest the savings in a policy (or another similar one) or make them notice the profitability as that earned during the time invested.” Also, take the opportunity to explain the debt that would be generated if the family buys a car, house or some appliance.
Should children be involved in family finances, to what extent, in what areas?
Definitely yes, says Calderón. It is a mistake to give many facilities to children, either to compensate for the absence at home or for the deficiencies they had in their own childhood and that they do not want to repeat in their children; “But this is counterproductive, since children and young people do not value the effort that is behind the income that parents obtain; one way to understand is make them part of the family finances, not necessarily with decision-making power (at an early age), but they do contribute with suggestions and know how the money is distributed, what it is used for, what needs must be covered. This will help our children to be better informed and understand why sometimes you have to say no to something”.
Garaicoa believes that children can get involved in issues such as avoiding the waste of food, water and electricity, and taking care of belongings, “Because all these things have a cost, the more we manage to take care of how much and how we use and consume, this will be reflected in many ways, either in small purchases or in accumulated savings that allow us to access great goods.” Sometimes, he adds, the simple gesture of commissioning them to deliver the bills in the supermarket makes them land and think about how much is spentand it gives rise to informing them that with the effort of mom and dad when they leave home to work several hours, these expenses can be solved, and that is why it is good that they also collaborate by valuing the food and education they receive, as well as the Internet and fun times.
Rodríguez advises stimulating the interest of children by involving them in the issues most relevant to them. “Maybe it could be saving for vacations, but also managing an allowance for your recurring expenses or saving part of that money for a toy/video game or another of your choice.” Parents should identify their children’s interests to make learning about financial decisions have an impact on them.
Can children handle money, in what amounts, from what ages and under what conditions?
As long as they are involved in family finances, they will better understand money management; and they can be assigned small amounts to decide the best use; If there is a family outing, it can be used so that the child makes part of his expenses, Calderón proposes. ”If he wants something, let him buy it and feel that money does not grow on trees.and just as it is obtained, it is spent, and that to obtain income it will have to carry out activities”.
The amount of money allocated can go up according to age and needs. “There are parents who decide to give them a debit card and have control of the money from the account, everything is feasible as long as there is financial education at home,” says Calderón.
Regarding the necessary skills to learn about money, Katia Rodríguez believes that As long as they can add and subtract, they can be introduced to the world of finance. “However, each child has a level of maturity that parents must identify in order to assign them certain responsibilities and not put large sums of money at risk. For example, managing a credit card versus managing an allowance. I would leave the credit card for more mature teenagers, who are aware of the risk of excessive debt.
Finally, Is it beneficial for children to earn small amounts for doing such tasks? Or is it okay to allow them to receive cash gifts? Yes the first time, but with conditions. As for the second, it is better to think twice. “It is preferable that the children carry out certain activities, so that they make a relationship between the effort made and the income.” Calderón specifies that you have to choose certain tasks, not all, “because the opposite effect can be generated, that the child wants to charge for everything”, such as taking out the garbage, washing the dishes or any basic task that should be willingly shared by all members of the household, without thinking about extra rewards.
Children should begin to learn the concept of using money from a very young age, so that once they learn addition and subtraction they can begin their first experiences of exchanging money, Garaicoa reinforces. “Starting from how money comes into our lives (with an effort related to its age, as a gift, as an allowance), the decisions that include having it (being careful to save it, what can be achieved with this amount, what can achieve if you wait and accumulate) and, finally, how it gets out of our hands”. The important thing, she stresses, is that parents support without paying for everything that children cannot buy with their own money“because we would not be helping in learning to make decisions with control of their emotions or to value the good use of money.”
The other point to consider, continues Garaicoa, is that In case of paying you a “salary” for an effort, this could not be for activities that are already your responsibility, such as keeping your room tidy or studying. A salary should be about something optional. “As parents, we must take the opportunity to teach the good habit of saving, and for this it will be good to set a goal, an objective that generates encouragement, for example, a game console. Living this experience in which they are constantly evaluating the growth of money will teach children and adolescents the benefits of being patient and how rewarding the end result can be.” (F)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
