A financially literate child becomes an empowered adult. This is why we must teach children … [+]
In an age where Instagram posts showcase the latest luxury fashion trends, TikTok videos feature lavish vacations, and influencers endorse expensive gadgets, kids are bombarded with a relentless stream of materialistic messages. This is often accompanied by thousands of “financial bros” in every corner of the internet promoting their latest “get rich quick” scheme.
Consequently, social media has cultivated a culture of instant gratification and conspicuous consumption, making it more important than ever for parents to teach their children how to build a healthy relationship with money.
Financial literacy and budgeting are life skills that significantly affect an individual’s psychological well-being and overall quality of life. Teaching children about money management from a young age can positively contribute to their psychological development and financial success as adults.
Here are two reasons why financial literacy can set your child up for success
1. Financial knowledge builds character
Teaching children to save for desired items helps develop the ability to delay gratification. They learn that their patience will be rewarded by gradually achieving financial goals rather than impulse buying. This process helps them understand that immediate desires can be managed and investing in long-term goals is deeply beneficial.
Research shows that delay of gratification can positively influence financial decisions and curb risk-taking behavior, encouraging individuals to exercise restraint and avoid debt.
Additionally, as children learn to save for the things they want, they can develop a sense of confidence in their decision-making skills. This can translate into other areas of their lives, such as academics and personal goal setting, boosting their self-image and overall psychological well-being.
2. Financial knowledge shapes financial well-being
Skills like budgeting foster a sense of responsibility. When children learn to create and stick to a budget, they gain the knowledge to make informed decisions about their spending. This process instills accountability as they ensure their spending matches their financial plans.
According to a 2021 study published in Financial Counseling and Planning, spending habits and attitudes about money management formed in childhood also significantly influence the financial behavior of adults. In other words, the earlier you start discussing budgeting in your home, the better your child’s chances of becoming a financially responsible adult.
Here are three techniques to equip children with the knowledge and skills to confidently navigate their financial future:
- Model of responsible behavior. Children often learn by observing the adults around them. By consistently demonstrating healthy financial habits—such as budgeting, saving, and thoughtful spending—adults can set a strong example for children to emulate.
- Normalize financial literacy in everyday life. Consistency is key to helping children understand and internalize financial principles. Adapt these concepts to their stage of development, gradually introducing more complex ideas as they grow. Regularly include discussions about money in everyday life, whether it’s grocery shopping, budgeting for family outings, or discussing the value of work.
- Provide opportunities to learn from experience. Hands-on experience is essential for reinforcing financial lessons. Providing children with real-life scenarios—such as managing a small payment, saving for a specific item, or participating in family budget decisions—allows them to practice financial skills in a safe environment.
Children develop a sense of responsibility, independence, critical thinking and problem-solving skills as they learn to manage their resources wisely, weigh options, anticipate consequences and make informed decisions about their finances. This can reduce financial stress as an adult, contribute to better financial decision-making and create a stronger sense of financial security throughout their lives.
Do you think your spending habits could be influencing your child’s financial mindset? Take this quiz to learn more: Excessive purchase rate