The Advantages of Being Financially Literate at a Young Age

By , UniversityHerald Reporter

The Advantages of Being Financially Literate at a Young Age

Photo : The Advantages of Being Financially Literate at a Young Age

Financial literacy is a necessary trait to practice. If your children are financially literate, they will have the ability to understand and successfully implement different financial skills in their life, such as proper budgeting, investing, and money management. 

Most people become financially literate later in life when they start to work and earn their own money. There can be benefits if your children start being financially literate at such a young age.

Here the advantages that they will have. 

Get Used to Budgeting

Knowing how to budget finances properly is one of the benefits of being financially literate. As an adult, budgeting is one of the challenging tasks they have to do every day. 

They need to budget their income for it to cover all expenses, and as a parent, you have to admit that budgeting is tough. However, if your kids start young, budgeting will happen naturally, even without much effort. 

Budgeting has a huge impact on financial management. How much a child can save every month, for example, will depend on how good they planned their monthly budget. The more savings they have, the faster they are likely to achieve financial freedom. 

Better in Managing Finances

When your kids get used to budgeting and do it properly, everything regarding their finances will follow. If they become good at budgeting, it's expected that they'll also excel in the overall management of their finances. 

A study conducted by FINRA, or Financial Industry Regulatory Authority, in 2015 suggests that teaching financial skills to children as early as possible will help them achieve financial security and success as an adult. 

Being literate in the financial aspect of life will give them a better perception of financially good or financially bad when it comes to decision making. Because of this, they'll avoid bad financial decisions and end up having good management of their finances, especially during adulthood. While getting a bad credit loan while unemployed is possible nowadays, it's still best to grow up as a  financially sound and independent person.

Better Investment Skills

Most business people train their kids on how to invest or manage their businesses. Same with finances, if a kid is trained on how to handle their money, it's more likely that they'll succeed early in life. 

Being knowledgeable and understanding finances well will help them reduce the risk of becoming a victim of scams, especially in investments. They'll also know the importance of investments in attaining financial freedom. 

Why Is It Important To Teach Kids Financial Literacy? 

Children who learned to manage personal finances early are often the ones who become better equipped and independent adults. By teaching children to become financially literate individuals, they learned how to make good financial decisions. 

When they're appropriately trained in making financial decisions, they'll know how to properly handle debts, such as installment loans, credit cards, and mortgages. Teaching them how to pay their debts will help maintain their debt-to-income ratio in the future, which is vital in an individual's credit score. 

Early financial education for individuals will allow them to have a healthy relationship with money. They will learn the value of saving, earning, investing, and managing debts. As a result, they will become financially responsible adults.

How To Teach Financial Literacy To Kids?

A study had established that children's financial habits start as early as seven years old, which means that a child should already be taught about finances at this age. But how would you teach seven-year-olds about money? 

Kids love fun, and they tend to be more engaged if you make learning fun. The first thing you need to teach your kids is how to earn their own money. If your child wants a new toy, instead of buying it for them, it's better to teach them to earn and buy it for themself. 

Your children can make garage sales for their old toys and clothes. Or they can set up a mini lemonade station in your front yard for your neighbors to enjoy. You can also offer to pay them if they do chores around the house. 

Next, you should teach children how to save and how to make the right financial decisions. You can do this via a game. Teach them how to save through the savings game. Set a goal and create a fun chart that will monitor their progress. 

Another thing you should teach your kids is how to make good financial decisions. You can help them by explaining the difference between needs and wants. Make them understand that they always have to prioritize their needs over their wants. 


Although being financially literate alone is not a guarantee that children will be good at handling their finances, it takes more than that. It would be best if they work hard to become successful in their finances. The first step in attaining financial freedom is learning how to become financially literate. Starting young will give them a lot of time to establish this trait. 

Author Bio:

Karla Lopez is a full-time writer that focuses on issues related to business and finance. During her free time, Karla loves binge-watching her favorite Netflix shows and reading books. Karla also loves to give business and financial advice to her readers, family, and friends. Her goal is to help everyone attain financial freedom.

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