Financial literacy is “the ability to use knowledge and skills to make effective and informed decisions on money management,” according to Investopedia. Math is definitely part of financial literacy, but so is the ability to consider one’s credit status, minimize and repay debt, and understand how financial transfers and goods work and make better financial choices. Teaching kids financial literacy early and during their schooling years provides significant benefits to their adult years. “What if when young people began their first job, they already started to put some money into their savings account? “Economy and accounting professor Annamaria Lusardi told the U.S. News & World Reports. “If younger folks could do this at the age of 20 instead of at the age of 50, it would make a huge difference.” These skills can be incorporated into current classes, by starting to teach kids about finances.
The biggest concern we see with children beginning to make loads of money when they are 20 years old is bad financial control. Kids drive sports cars and take monthly trips on their credit cards without thinking they are going to end up in debt. Financial literacy is a key ability that involves planning, deferred gratification, savings, and just spending what you have. You should make the child save their monthly allowance to purchase the Jordan they want instead of paying for them. You should still charge them interest if they borrow money to do things so they can understand how the debt works.
Students who learn how to handle their money early often become adults who are well able to survive financially. By training children to make sound financial decisions, they learn to pay down their loans or to stop them entirely. Lusardi’s Study Review on “The Value of Financial Literacy” states that “individuals make a lot of financial choices, and those decisions are strongly interrelated. Lack of financial literacy is not just an issue in case of developing economies. Consumers in developed economies too, often fail to show a clear comprehension of financial concepts with a view to understanding and navigating the financial landscape, handling financial risks efficiently and preventing financial hazards. Globally, nations are met by demographics that do not grasp the fundamentals of finance. Poor financial literacy has left millennia who comprise of the greatest share of the America’s (one of the most powerful countries) workforce unprepared for a severe financial crisis such as the coronavirus pandemic, according to studies by the TIAA Institute. Also, among those reporting high knowledge of personal finance, only 19 per cent responded to questions about basic financial principles correctly. Hence, Financial literacy is essential to helping households invest enough to have adequate retirement income while avoiding high levels of debt that could lead to bankruptcies, losses and evictions. Any change in financial literacy would have a significant effect on customers and their ability to secure their future. Recent events make it all the more essential that people grasp simple finances because they are constantly being asked to bear more of the burden of investing decisions in their retirement savings while being thrown with more and more financial options that are complex and in some case overwhelming.
Learn more about financial literacy for kids and teens at www.education10x.com