The Importance of Financial Literacy

November 15, 2013 by

We all know that being money smart is important life skill. Some of us have developed it on our way to adulthood and some of us haven’t.  Those who haven’t, are going through a nightmare of trying to make ends meet, dodging bill collectors phone calls and having sleepless nights.  Their money managing decisions not only affect them, but their loved ones.  For those of us who learned to become money savvy, it may not have been an easy path. Most of us thought ourselves to be financially literate through a series of trial and expensive errors.  Very few individuals were taught by their parents.

kid-piggy-bankI find it fascinating that most parents would skip such an important life lesson on money management.  I came to realize that most parents don’t know how to teach financial literacy as they have never been taught. They think that their children will pick it up as they grow up.  Unfortunately, some individuals never figure out how to be money savvy, and they end up going through financial hardships in life.

In addition, some parents think that kids are too young to learn about money. In their mind money is a grown up thing. They don’t want to burden their children with it, as it associates them with bill paying, etc. However, time flies, and very soon those children are youth, who don’t understand or appreciate the value of money. That is when some parents think it is too late to teach them anything.

Kids are not too young to learn about money. I teaching kids as young as 4 years old.  If they can understand technology such as iPad and video games, they are capable of understanding basic age appropriate financial concepts.

Only few years ago our society has started to emphasize the importance of financial education due to current economic crisis. There are a lot of knowledgeable experts who are assisting individuals with financial difficulties. However, I don’t think that this is enough. In my opinion to solve the problem of financial illiteracy, we need to attack the root of the problem, which is to ensure that our children are educated about personal finance before they become adults.

An example I like to use to illustrate the importance of financial literacy is how John D. Rockefeller Jr. used an allowance to teach his son John III important financial lessons in 1920’s.  He drew up a contract with his son with regards to the allowance. You can see the copy of the contract here. If John D. Rockefeller Jr., who was a billionaire, thought that it is important for his son to be raised with financial lessons, don’t you think that we need to teach our children to be financially literate, too?

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