Financial literacy in youth: Why it's important to teach your teens about money

There was a time when it was thought smart to shield kids from matters of money. But in the age of the metaverse, you shouldn’t be too surprised if your child’s first word is ‘NFT’ or the ‘stock market.’ Like most behaviours, financial responsibility is a learned behaviour that children usually absorb and emulate through socializing with their parents, schools, and the outside world. Research shows that kids begin to understand the concept of money from the tender age of seven, and their interactions with the world and institutions around them are what cement their attitudes towards and perceptions of money.

But surely, seven is too young to teach my little one about money, you might be asking? Won’t that make them money-minded? While your concern is valid, the answer to that might not be as straightforward as you believe. Kids are smarter than you think and a good financial model embodied by the people that your children most adore – yes, we’re talking about you, the parents – can lead to them having a more evolved understanding of and a healthy relationship and future with money.

Here are the top 5 ways in which you can foster financial literacy in your children before it’s too late:

Teach them the concept of money

For kids, money might seem like the magical potion that comes out of the metal machine once you punch in numbers. Kids are not brought into the world knowing about money and its miraculous powers. Instead, it’s your responsibility to cultivate a basic understanding of what its function in the world is. One way to do this is by taking them along for errands like grocery shopping. Have them explore the aisles, explain to them what the boards with numbers (prices) mean, and teach them why an iPhone costs more than a bag of oranges. Without encouraging the belief that money is the know-all and end-all of existence, stoke their curiosity about the concept by making them active, willing participants in the purchasing process for your family. This gives them agency and the confidence that they can share their money-related concerns and inquisitiveness with you, no matter how young.

Saving money makes ‘good cents’

Whenever you can, teach your kids about saving through the practice of allotting allowances. Enable them to earn their own share of savings over the course of the week through fulfilling small chores and errands. Gift them the sense of accomplishment in being able to make a purchase out of the money that they’ve saved – no matter how little!

This also goes far in teaching them the lessons of privilege – how even the ability to save is granted to only those with an opportunity to earn. Emphasize the importance of regular acts of charity, too. Research shows that allowances give children the hands-on experience of transacting with money in the real world.

Open a savings account for your kids

In the UAE, multiple banks, including Commercial Bank of Dubai, Sharjah Islamic Bank, and Mashreq Bank, offer the option to open a savings account for children. They allow minors to open a savings account with the help of a guardian and even issue debit cards for the same. Once your children reach an age where they begin showing caution and responsibility with money, starting a savings account for them will be a good lesson to both nurture the habit of saving as well as responsible spending.

For kids who are handed a credit card without limits, money then becomes an inexhaustible pathway to attaining whatever they want, no strings attached. However, granting your children direct access to their savings and encouraging them to increase it by taking up side gigs and part-time jobs translates to them that you trust them and that you’re willing to treat them like mature adults.

However, a note of caution to all parents: your children will slip and make a purchase that they’ll regret. In these instances, it’s your responsibility as a parent to be gentle with them while also being firm. Allow your kids to make mistakes because this is the only way they’ll learn that money once spent is money gone.

Expand your repository of financial knowledge

The world is evolving every day. New modes of handling and enhancing finances reveal themselves on the daily. Every day, the financial world is witnessing monumental shifts! The best way to improve your children’s financial wisdom is by improving your own. Consume knowledge from the right sources; read the news, follow the rise and fall of stocks, and listen to good financial podcasts with your young ones. Show them a willingness to learn about money and savings and you’d be surprised by how much they can teach you too.