Teaching Financial Literacy to Children: The Importance of Early Education
In today's fast-paced world, financial literacy is an essential life skill that every child should learn. Teaching children about money management from a young age helps them develop a healthy relationship with finances and prepares them for a financially secure future. In this blog post, we explore the importance of teaching financial literacy to children and offer expert insights from licensed CPA Danelle Dorsey.
Why Financial Literacy Matters for Children
Builds Strong Financial Habits Early Introducing children to basic financial concepts such as saving, spending, and budgeting helps them develop good habits early on. These habits can set the foundation for responsible money management in adulthood.
Promotes Financial Responsibility When children understand the value of money, they are more likely to make informed and responsible financial decisions. This includes distinguishing between needs and wants and making choices that align with their financial goals.
Prepares for Real-Life Financial Challenges Teaching children about financial literacy equips them with the skills needed to navigate real-life financial challenges. Whether it's understanding credit, managing debt, or investing, early education helps children feel confident and prepared.
Encourages Goal Setting and Planning Financial literacy encourages children to set goals and plan for their future. Whether saving for a toy or college, learning to set and achieve financial goals instills a sense of discipline and accomplishment.
Reduces Financial Anxiety Financial stress can be a significant source of anxiety. By teaching children about money management, parents can help reduce financial anxiety and promote a positive outlook on finances.
Key Concepts to Teach Your Children
Saving and Budgeting: Encourage your child to save a portion of their allowance or gift money. Teach them to budget for specific goals, such as buying a new toy or saving for a trip.
Understanding Value: Explain the difference between needs and wants, and discuss the importance of making thoughtful spending decisions.
The Basics of Investing: Introduce simple investment concepts, such as how money can grow over time through interest or investments.
The Concept of Credit: Explain how credit works, including the importance of maintaining a good credit score and the potential pitfalls of debt.
Charitable Giving: Teach the value of giving back by involving your child in charitable activities and explaining the importance of helping others.
Insights from Licensed CPA Danelle Dorsey
To provide expert guidance on this topic, we spoke with Danelle Dorsey, a licensed CPA with extensive experience in financial education.
Q: Tell us a little about yourself.
A: My name is Danelle Davis. I was born and raised out of St. Petersburg Florida. I was born into a single-family home therefore I’ve always had a passion to strive for a better life having came from a struggling home and troubling childhood. I currently live in Riverview, FL where I practice controllership accounting for a medical management company. I’ve been licensed as a certified public accountant for 2 years and working in business over a decade now. My highest level of education is a masters degree in forensic accounting. I obtained that degree from Liberty University with Distinction back in 2019.
Q: How did you start teaching your son at a young age?
A: Over the years in my profession, I’ve developed a natural ability to mentor others, no matter the age. It wasn’t long after obtaining my first accounting job in 2015 that I realized the lack of diversity within finance and accounting. Ever since, I’ve been extremely forthcoming with my concerns to educate the next generation. As such, my son has easily fell into this trend of mines to develop financial literacy within the youth. Mainly for the lack of diversity but also due to me wanting him to have a better chance of financial independence and stability than I had going into adulthood.
Q: Why is it crucial to start teaching financial literacy at a young age?
A: After having spent the last few years as founder, chairman and educator of my non for profit The Account Scouts Academy, Inc. I came to realize many of the youth appear to have the same issues as it relates to financial literacy. The issue is EXPOSURE. It’s not that these children will grow older some day with the intent to be bad with their money. In fact, many seem to be interested in learning more about money, investing, taxes and business. I think it’s absolutely crucial to water the minds of the youth while they are young. They retain it better. They acknowledge the importance better. And most importantly they are too young to be stuck in their ways or old habits.
Q: What are some practical tips for parents to teach their children about money management?
A: The most practical way to foster money management is to create a system with your children. This system should consist of them completing certain tasks and earning money for it. The tasks should be achievable requests such as: cleaning the kitchen, or the bathroom, helping with laundry, bringing home good grades etc. And the money they earn should be used for whatever they see fit, not necessities the parent is responsible for. When you reach the point of giving them the money, remind them of some of the things they have asked you to buy recently that weren’t necessities while also encouraging them not to spend it all in one place. In the beginning all of the children are bad with their money. But overtime, you start to notice they’ve retained $5 or $10 or $40 because you see he/she pull out their wallet and remember you gave them this money sometime ago.
Q: How can we follow you for more tips?
Please follow me on LinkedIn here:
Please follow the Account Scouts Academy here:
Conclusion
Teaching financial literacy to children is an investment in their future. By equipping them with the knowledge and skills to manage money wisely, parents can help their children build a secure financial foundation. Whether through practical lessons or engaging discussions, starting financial education early can have a lasting impact on a child's life.
For more tips on financial literacy and parenting, explore our blog and connect with our community of informed parents. Share your experiences and strategies for teaching financial literacy to your children in the comments below!
