The educational system and society overall are beginning to realize that financial education is important. According to the OECD , “Financial education can help enhance financial literacy by increasing financial knowledge, skills and attitudes. In turn, this can contribute to individuals’ (including vulnerable and low income) participation in financial, economic and social life as well as to their financial well-being.”
Parents today worry if their children understand the value of money and whether they will be able to sustain themselves financially in the future. These concerns are confirmed by alarming statistics on lack of savings and huge amounts of debt accumulated by millennials.
The web offers a great variety of kids’ allowance systems for practicing healthy financial habits, but we wonder why so little attention is being paid to children’s understanding of how modern society is functioning. In our view, explaining basic concepts of business and economics should be a foundation for any financial education, which is often absent from the formal educational curriculum.
Which concepts are important, what should we teach our kids and how would this help them in the future?
To realize that “nothing is for free”, kids should see the objects around them as goods which were made by businesses , they need to understand that the price of any good is a compensation for the resources it is made from and for the work performed by other people. Explaining our decisions as a consumer to purchase any good or service as a connection with a business offering this good or service will create a sense of empowerment and responsibility .
Connecting jobs to the actual production of goods and services makes future job choice decisions much more realistic. Realizing that, at our jobs, we act as producers contribute to the creation of a good or service is a vital element for future professional orientation.
Lastly, special attention should be paid to explaining the concept of profit. Kids should see the difference between revenue and cost and be able to calculate the cost of production . Seeing companies or institutions as businesses with profit as their final goal will avoid confusion and false expectations.
We focus too much on training our kids’ behavior instead of helping them make sense of our complex world.
Spend some effort on building a foundation and you will be surprised how it will affect their future judgement and choices as a consumer.
Written by Lena Perepelova, Founder of FunFinance Virtual Business School for Kids