Individuals who attain financial literacy at childhood perform better in money management and can handle financial crisis better, according to a new study.
The findings, reported in Social Work Research, found that teaching children about the value of money and its management from an early age helps in improving mortgage loan performance in adulthood, by reducing loan delinquency and foreclosure.
"Nearly all parents agree that making sure children are financially literate is an important task - yet one that they may feel ill-equipped to carry out," lead author of the study Michal Grinstein-Weiss said in a news release.
"But parents don't need special knowledge or skills to prepare their kids for financial success. Routine family life is rich with opportunities to teach them the ins and outs of money matters."
However, a national phone survey conducted in August found that a majority of American parents don't teach their children money management. According to the findings of the survey, most children (61 percent) in the country get almost $65 a month ($780 a year) as allowance from their parents, but a majority of them are least bothered about saving it and spend their money on toys or hanging out with friends. Concerned with the findings, researchers urged parents to teach their children money management to make them successful in life.
Following are some tips from Grinstein-Weiss that can help parents to teach and boost their children's money management skills:
- Dinner time is an excellent time to start the basics of money management. Parents can start with explaining the difference between needs and wants
- Serve as a role model to children by setting up goals like "family vacation" and depositing your pocket money in a piggy bank regularly for that reason
- Take the child to the bank and open a savings account in his/her name. Monthly visits to the bank and checking online bank statements with the kid help in strengthening the lessons
- Boost the kid's money management skills by educating them about budgeting. Teach the basics of money management like price or cost of a product and encourage the child to save money in advance for an event he/she wants to attend
- Involve the child in money-related discussions and activities, like grocery shopping.
