The Power of Financial Education
Uncertainty about financial topics is commonplace and often leads to feelings of confusion and frustration. From budgeting basics to investing for retirement, there is an unending list of financial knowledge to acquire. Thankfully, there is no shortage of resources for financial education.
For children and adults alike, the importance of financial education is clear. Learning how to safely manage money can equip individuals with knowledge to be financially self-sufficient and secure. Without the proper financial skills and knowledge, it is difficult to blueprint a secure financial future. Here, we’ll explore the importance of financial education, and the best ways to educate kids and adults on financial topics.
What is Financial Education?
Financial education is the process of learning and understanding financial concepts and principles, like budgeting, banking, investing, and asset allocation. With a comprehensive understanding of the world of finance, individuals develop the skills needed to make sound financial decisions.
The importance of Financial Education
Financial education is the difference between financial stability and financial insecurity. Those with a sound background in financial decision making are able to capably budget, plan for retirement, and invest – rather than simply save – to take advantage of compound interest. This can make a substantial difference in an individual’s financial outlook and wellbeing.
Financial education can prevent many common financial mistakes, like paying unnecessary or exorbitant fees to banks or credit card companies. With proper financial education, understanding fees and reading the fine print on a financial product can be quick and easy.
Plus, convincing numbers point to the importance of financial education as well. Studies show individuals who receive financial education are more likely to save, demonstrate greater financial literacy, and better understand financial topics than those without financial education.
How to Teach Financial Education to Kids
Due to the importance of financial education, parents and teachers should do whatever they can to ensure kids understand the basics of money management. Ambiguous financial topics need to be approached in an engaging and kid-friendly way. Here are some of the best ways to teach financial concepts to children:
Allowance and Savvy Spending:
Allow allowance to be an opportunity for children to explore money management. Set ground rules, like 50% must be saved – and only then can 10-20% be spent as desired.
Follow the 50/30/20 Rule:
This rule suggests 50% of income should be used for necessities, 30% can go towards wants, and 20% should be saved. Have kids calculate personal spending based on their allowance, and have them explore the difference between short-term wants and long-term savings.
Teach the Difference Between Needs and Wants:
Teaching kids to differentiate between needs and wants can help provide a better understanding of budgeting and cost cutting. Have children create a list of needs vs. wants and explore the ways you can have needs (like food and clothing) without breaking the bank.
Explain the power of giving back. Donating to charity helps children understand how much can be done with what little we have. Encourage children to pick a charity and donate a certain percentage from their allowance or their savings!.
How to Teach Financial Education to Adults
For adults, there are countless online financial courses, Udemy courses, classes, and other educational materials designed to teach financial education. Here are some of the best options for learning about financial topics:
Online Financial Courses:
Online courses are generally cheaper than traditional courses and can be completed on the student’s own time. However, these find a balance between theoretical financial basics and real-world applications.
Udemy has a variety of high-quality courses and classes on a range of financial topics, from budgeting to retirement planning. These classes are typically cheaper than traditional classes, but less comprehensive than in-person courses.
Financial In-Person Courses:
For a more comprehensive and structured learning experience, in-person courses often offer more educational enrichment as they require interaction between instructors and students. These courses go more in-depth and cover a range of topics in greater detail.
Books, Articles, and Videos:
Books, articles, and even videos are great resources for learning about financial basics. These materials are often the most cost-efficient and carry less of a time commitment.
Financial education is an integral part in setting yourself and your family up for a bright financial future. From budgeting basics to retirement savings, teaching kids and adults about money is an important element of life. With the right resources and guidance, financial education can be an enjoyable and efficient process. Taking the time to learn about financial topics pays off in the end – when it’s time to make important financial decisions and save for the future.