As you may know, having ‘financial literacy’ means understanding and feeling comfortable with personal financial matters, like household budgeting, how credit cards work, the importance of savings, making personal investments, and more. Financial literacy helps you consider and weigh all your options before making financial decisions that could affect your future in dramatic ways.
Most of us learn financial literacy in young adulthood (if at all), but if you introduce your children to this important topic early, they will be much further ahead than their peers. And wouldn’t it be great to give them the foundation to make informed decisions about their financial future right from the start?
Here are some basics about why it’s so important for children in Dubai to understand financial literacy.
- Understanding budgeting and savings prepares them for a solid financial future.It’s almost too easy to spend money. Because we’re surrounded by temptation and advertising for the latest ‘must-have’, it can be difficult for people, especially children, to independently develop a sense of what they want versus what they actually need.
- Financial literacy helps children prepare for this challenge by teaching them how to budget their spending from an early age so that they can afford what they need and save up for what they want. Essentially, children learn that budgeting means prioritising their spending to meet their needs and save for what they want. They will also learn that they earn a feeling of accomplishment when they can delay gratification and save for big ticket item, like a new gaming console.
- Learning how debt works can save them from making costly mistakes. It’s true that the right kind of debt can help people create a financially fruitful life with a diverse portfolio of assets. However, most people don’t quite understand how to make debt work for them. Often, they can find themselves with too much debt that is both costly and time-consuming to escape.
- Ensuring your children are financially literate means helping them know when (and if) they can and should apply for certain types of debt, like mortgages and loans. They will also understand how credit cards work and use them as tools for financial success, instead of getting into trouble.
- Preparing them for emergencies will save them from financial misfortune.
Unfortunately, it’s simply a reality of life that, at some point, we will have to deal with an emergency that comes with a hefty payment. It could be an unexpected medical bill that’s not covered by insurance, an emergency plane ticket back home, or even something positive, like the opportunity for your child to participate in an exclusive field trip for school.
- Understanding how insurance works, why a financial safety net is important, and how to negotiate solutions, like working out a payment plan, will help children learn that, though an emergency may be inevitable, it doesn’t have to ruin their finances, especially if they understand how emergency funds and certain types of investments can protect them.
- Helping those with less is an important part of creating a secure their finances.
Our children inherently understand the importance of giving back to others. When they learn about financial literacy, they’ll understand that part of the process is giving to those less fortunate. Charity becomes built into the process, along with budgeting and savings, to create a complete picture for financial success.
Would you like your kids to be financially literate? For more information visit our Finance for Kids program page here.