By Nancy Phillips, BS, EMBA, Author and Speaker; Founder & President, DollarSmartKids Enterprises, Inc.; Creator of the Zela Wela Kids. Nancy is the mother of two elementary school-aged children.
As parents, we are automatic educators, and we want our children to learn the skills they’ll need to thrive and reach their full potential in life. This is true for parents around the world. With the financial industry and global culture changing as rapidly as they are today, it’s easy to see that our children need guidance; current, effective, honest information, that has their best interest and future well-being at heart.
The Lessons Must Have These Key Elements
These core financial life lessons must involve a combination of information, beginning with inspirational and motivational messages, so children understand how the information can affect their individual lives. The messages must also be simple, and effective – so the lessons are implemented and become habit. Beneficial learning only occurs if the new information is implemented, thus creating positive decision-making skills and behavior.
Why Financial Life Skills Must be Taught at Home and at School
Financial and life success lessons need to occur both at school and at home. Why? Because effective learning involves repetition, consistency and practice, and financial life skills need exposure in both environments to provide sufficient awareness and practice over time.
Young children develop their money habits and attitudes from their parents through observation and modeling, the same way they develop other key areas of their personality and beliefs. Parents, or whoever is raising the child, are the most influential financial teachers because of this early subconscious mindset development. Parents can also give children the consistent opportunity to discuss important topics, along with the responsibility and opportunity to practice money skills.
Teachers provide an invaluable opportunity for children to discuss money topics with peers, read stories and discuss them, practice numeracy skills related to money and much more. All these lessons and activities combined will benefit the child by giving them perspective, and a common language to discuss money comfortably both in childhood and eventually during adulthood.
Young children are not intimated to learn or ask questions about money, they want to learn and they believe they can. This is something that we as a society need to recognize and respond effectively to, so we can enable future generations, and empower them to be financially responsible adults.
If we want to stop the attitude of entitlement that is destroying the motivation of many young people today, we must allow them to experience desire and purpose, the starting points of inspiration, action and ultimately, personal success. This is what builds real confidence in a person, the recognition of his or her own capability. If they are given everything they want, children are robbed of the opportunity to experience these transformational moments in life.
The GISS Method™ – Good for the Child and Our Society
One of the most powerful ways to build long-term wealth also happens to be one of the most effective ways for children to learn to manage money and develop their financial numeracy skills. The GISS framework also teaches children valuable concepts, such as the power of giving, and saving for the future.
This is an ancient concept often referred to as “tithing” which means “a tenth.” As children begin to learn about, and give time and/or money to various causes, they become aware of their ability to help others and make a difference in the world. Increased engagement in our global community is related to high self-esteem and personal happiness, just as good relationships and experiences are.
Investing is an abstract concept for really young children, but it can be introduced gradually. They don’t have to invest any of this money for years, it depends on the child and family. Putting small amounts of money aside consistently will give them a base to start with when the time comes. Initially this segment can be explained as the money the child “grows” to use and live on when they are older. They could use a portion to open their first entrepreneurial venture. The key message here is that they don’t have to have large amounts to get started.
Research has shown self-control in childhood to be directly related to financial success in adulthood, and saving can help enhance this trait. This is the money a child puts away for something special which costs more than their spending money allows for. As children work toward specific goals, whether it’s saving for a bike or a toy of some kind, they begin to learn the action steps needed to achieve those goals, while beginning to develop their personal responsibility in relation to money.
This category helps children learn how their actions with money have consequences. Once children use their own money for purchases, they begin to consider the cost and value of things. It’s much better for a young child to have a chance to handle money and make mistakes with a few dollars, as opposed to going into thousands of dollars in debt in their teens or early twenties. One of the most important financial skills and habits we can help instill in our youth is how to spend wisely. Without this ability, severe debt and potential bankruptcy are very real risks.
The process of consistently dividing all income into these four categories provides children many learning benefits including:
- Identifying personal values
- Repetition and practice of hands-on numeracy skills
- Critical thinking and decision-making
- Profound and meaningful conversations with parents and teachers
- Practice in goal setting
- Age appropriate responsibility
- Decreased attitude of entitlement
- Enhanced self-esteem
Children today need financial life lessons and hands-on opportunities that provide them inspiration, hope, personal relevance, and a framework to manage their money and dreams successfully. When these elements are combined, their imagination, personal competency, and optimism flourish.