Smart Tips for Teaching Children Personal Finance: A Guide to Financial Literacy

The knowledge of personal finance is a must have for children, hence, it is very vital that they are taught as early as possible. It gives them an understanding of how money should be managed and how to make smart financial decisions all through their lives. But what exactly is personal finance? It's the management of one's money, including budgeting, saving, investing, credit and debt management, and insurance and risk management.

Take a look at some important details:

According to S&P’s Global Financial Literacy Survey, African countries score the lowest in terms of financial literacy in the world. The most financial literate country is Botswana at 51 per cent and the least is Somalia at 15 per cent according to the survey.

The S&P survey shows that Nigeria has an adult financial literacy level of 26 per cent which mirrors the current realities of hardship and poverty. This is because most individuals were not trained on financial education as children. The survey highlights that “the young are a vulnerable group and an important target for financial education programmes.”

AREAS OF PERSONAL FINANCE 

Having established how important Personal financial education is and that it should be taught to kids, we will now dive into the different areas of personal finance.

•Budgeting & Spending: This really is all about a plan for money and making smart spending decisions when it comes to purchases. While encouraging kids to mind their spending habits, it is important to teach them how create budgets and stick to it. 

•Saving & Investing: having savings and making investments are both crucial parts of financial management. There are several ways of educating children about saving money for the future and investing their money wisely. Some of these ways include introducing them to different types of savings accounts and discussing available options for investment while also educating them on the risks. 

By motivating them to save a portion of their allowance or income, you can help them comprehend the value of postponing gratification and the advantages of long-term savings

•Credit & Debt management: It is easy to fall into debts because of the lack of education about how to manage one’s personal finances. Help children understand the importance of building good credit, which can help them in the future when it comes to getting loans or mortgages.

•Insurance & Risk management: Insurance and risk management is an area that can often be overlooked but is crucial to financial stability. Educating kids about the various types of insurance will help them understand the importance of protecting themselves and also how important it is to protect their assets. 

The current world we’re in is constantly becoming intricate on an increased level, and eventually, children will have to take charge of their own finances. Experts advise that parents should trigger the process for their children’s financial education to equip their children with the knowledge and skills required to make well-informed and prudent financial decisions for their everyday life. This will make their financial aspect of their transition into adulthood very safe as they will be able to live independently while making financial choices that are sound.