When should I start teaching my child financial literacy?

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When do I start to teach my child financial literacy?
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16:33, 18.04.2023

Editor's note: With this article we begin a new series of articles by Ludmila Gulyaeva on financial education for children. These materials will be useful not only to parents, but to everyone who wants to be conscious about their financial well-being and improve their own financial literacy.



Do our children need financial education?

From my experience I see a situation where parents are divided into two opposing camps. Some pay special attention to financial education of children, actively look for books, courses for themselves and their daughters and sons, try to saturate their child's life with information about economy, finance and business as much as possible from an early age.

Others, on the contrary, for a long time are afraid to touch this topic with children and believe that it is not worth overloading them with "adult issues". What if children grow up to be greedy for money and mercantile? Some even argue that having money in a child's possession at an early age can lead to the development of a tendency to accumulate money needlessly or to spend it thoughtlessly. As you might guess, the optimal position is somewhere in the middle.


In fact, most fears about the harms of financial education are unfounded! Such fears arise from a misunderstanding of what financial literacy and financial education are. It is financial education that will help a child in adulthood to ensure their well-being and to develop the ability to see and use the opportunities available. How your child grows up will depend on a number of factors, including whether you teach them how to deal with money, how to treat it and how to earn and spend it. If you do not pay attention to such issues in preschool and school age, postpone education about money and finance as much as possible to "when the child is older", the opposite situation can happen. If you, as parents, do not deal with your child in terms of financial education, you will get a surprise in the future - the child will learn on his own, draw his own, not always correct, conclusions, and may indeed become both mercantile, when money is the main measure and value in life, and wasteful, who does not value the money resource and is not able to manage it.


Financial literacy, like walking or talking, does not appear at the same time but requires practice and training! Before you decide whether your children need financial education and at what age, remember the biology of child development.

Not a single skill in a child appears at a moment's notice. For example, you can only see your baby's first smile at the age of two months after much training. Even vision in newborns is not clear and only finally forms at the end of the first year of life. And the ability to walk, speak, write and read is generally an incredibly difficult path of setbacks and ups and hard work for every child. It is the same with financial literacy. However, while a child can learn to walk by instinct and by looking at the people around them, they will need your support and help in the world of finance. You shouldn't put off financial education until adulthood because it will be too late. Ask yourself this question: do you really think that at exactly 18, your child with the arrow of a clock will learn finance on their own? It's a lifelong process. Knowing how to decide how to spend money, how to save, how to shop rationally is also a "muscle" that needs to be "trained". Money as a car is only a tool, a means to solve problems. So it is not for nothing that every driver should first learn how to drive a car and then hit the road around town!

Financial literacy is . ? In a narrow interpretation, it is all knowledge of finances and the ability to make effective decisions in different life situations to improve one's well-being. But in practice, financial literacy is a broader concept, as it includes not only knowledge about finance, money, credit, investments or business, but also knowledge from other areas, which together a person needs to be able to make effective decisions in order to act correctly in order to ensure his or her well-being. For example, to be able to present oneself in order to get a better job; to overcome psychological barriers in order to earn more money; to be able to choose an occupation considering one's abilities and interests and much more.

the "ideal" financially literate person is someone who does what they love and earns a living from it, is able to provide for themselves and their family financially, has an established "safety cushion" (savings), invests thoughtfully and carefully, is able to see opportunities and is willing to use them to improve their lives.

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Do we all need to be financially literate?

Definitely yes, because we are all financiers in our lives. Regardless of our economic knowledge, we manage our personal finances every day: choosing a profession, studying, building a career or a business, looking for sources of income, spending money, trying to meet our growing needs in a constant shortage of finances.

Our children will especially need financial literacy. Today's economy faces certain negative trends that will require our children to be more financially advanced than we parents are:

  • An ageing population and inefficient pension systems. In most of the developed world, the share of pensioners in the population is growing and the share of the working-age population is shrinking accordingly. Traditional pension systems are unable to provide decent pensions for today's young people under these conditions, and the retirement age of citizens is gradually increasing. Consequently, modern children should be prepared to build a financial cushion during their lifetime to ensure a decent standard of living when they reach retirement age.
  • Increasing complexity of financial services. Consumers without special knowledge are finding it difficult to know which financial services are more profitable, which ones carry higher risks, and how to choose the best offer for themselves among the variety of providers. Unscrupulous financial intermediaries often take advantage of the low financial literacy of citizens. Without financial knowledge, people are more likely to be victimised by fraudsters.
  • Reduced permanent employment. Long-term and indefinite contracts with employers, and long-term work for one company are becoming a thing of the past. Freelancing and short-term employment are on the rise, giving people freedom on the one hand, but at the same time leaving them without a stable and reliable source of income on the other. One needs to constantly be able to manoeuvre one's finances in the face of fluctuating revenues and build up a financial cushion.
  • Risky financial transactions and aggressive financial advertising. Thanks to the internet, a financial transaction can be done in seconds, and our phones and heads are bombarded with numerous aggressive advertisements: buy bitcoins, play casinos, take a loan in a minute, invest risk-free, trust your money to funds... Everything is getting closer, more accessible, but it carries a lot of risks, which requires consumers of financial services to have critical analysis skills and financial literacy.
  • The crisis nature of the economy. Economies develop cyclically, with periods of growth followed by periods of decline and crises. Crises are traditionally accompanied by unemployment, contraction, inflation, and decline in entrepreneurship. Financial literacy allows us to be prepared for such fluctuations and feel secure even in difficult times.

Financial education: To educate or NOT to educate?

A common view is that there is no need to educate children at all, which also applies to financial education.

According to this position, children learn everything themselves, carefully observing their parents, peers, the world around them, so they will get everything they need for their lives on their own. This approach has a right to life, but the problem is that parents often misunderstand it: they stop being involved in children's upbringing at all, including financially, sometimes actually justifying their busyness, irresponsibility and unwillingness to spend time and energy on children's upbringing. When psychologists or pedagogues say that children should not be brought up they often mean, firstly, that it is necessary to let the child choose independently, not making decisions for it, and secondly, to show right examples of behaviour to a child by example. When a child looks at his or her parents, he or she reads their experiences, values and behaviour patterns and will then consciously and subconsciously use them in his or her life.

Children will really learn from you in your actions, in your daily communication, in your joint games, in your household chores. But to rely only on this method of financial education, you need to meet two conditions. First, you must have real communication with your children, spend enough time with them, involving them in the discussion of financial topics. Second, you yourself must be a successful financial role model for your child.

Ask yourself: Are you a model financially literate person? Do you have your finances in order? Do you want your children to replicate your financial behaviour? How do you feel about money, are there blocks and prejudices that prevent you from earning more? What will your children learn if they follow your lead? The answers to these questions will probably not make you happy. Most of us were not taught financial literacy when we were children and the financial behavior patterns of our parents and grandparents, which we absorbed as a sponge in our childhood, have Soviet roots or were designed to survive the turbulent 90s, respectively, are ineffective today.

So, in order to set a good example for your children, you should really start with your own financial education first: improve your financial literacy, which the children will notice and remember.

When should I start teaching my child financial literacy?

When do I start my children's financial education?

You should start when a child first becomes interested in money and shopping. This is usually between the ages of four and five.

  • Ages three to six are an introduction to money and family finances. At this age, the child may play in a shop, count coins, look at different kinds of notes, put toy notes and later real notes into a money box. Amounts are not important at this age. It is important for the child to understand, through games and conversations, the processes and phenomena of family finances: where money comes from (income) and where it disappears to (expenses), dad and mum work and get paid for their work; what money is needed for; that there are situations when money is not enough and you need to collect it, how and for what purpose using a piggy bank; that money should be handled carefully - do not take someone else's, do not tear; that money can buy goods, and every good has its price and more. If the child asks questions about money and finances, it is important to maintain their interest and answer them. At ages 5-6, it is possible to involve the child in the choice of goods in a shop - for example, asking them to put biscuits in the basket or to pay the ice-cream vendor money (accompanied, of course, by adults and if the child shows such a desire himself or herself).
  • The age of 6 to 7 years is when a child is preparing for school and first experiences making financial decisions for themselves. It is usually the first time at school that your child will be exposed to the constant possibility of buying things for themselves in the school canteen and seeing how their classmates manage their money. Even if your child gets free meals in the canteen or you give them food from home for school, allow your child to shop independently from time to time in the ideal shop. At this stage of your child's development and socialisation in the community, it is extremely important not only to make their own shopping decisions and count money, but also to keep up with their classmates who already have active experience in shopping and spending money.
    However, in order for your child to be able to use the pocket money you give them to spend independently as early as the first or second grade, they need to be prepared for it. Before school, the child needs to develop a clear understanding of the purpose of money as a measure of the value of goods, to have their first shopping experience, to know where money comes from in the family and where it is spent. To understand that different notes and coins have different values, and that money itself has a certain value and belongs to certain people, respectively one should not take other people's money. Finally the first year pupil has to understand that even a small amount of money is important and that he/she has to make purchases consciously, and not by a momentary decision.
    It is important for your child to have had a good first experience of shopping by the time they start school. For example, give your child a small amount of money in the shop and ask them to choose a certain item for themselves with your help. Explain that this money can be used to buy a variety of items, and ask them to choose one item out of many possible ones, as an example of the problem of choice.

  • Age 8 - 12 - this is the age when active experience of pocket money is formed, deepening the understanding of family and personal finances. As a rule, today's children start to operate with quite significant amounts of money given to them by friends, relatives on holidays. Do not take away the money given as a gift, but suggest that the child should not spend it immediately, but save it for something bigger, more valuable. You can even encourage saving by making sure that you add money to the child's savings, so that there is enough for the desired purchase.
  • Over the age of 12 is the age when the child develops skills to manage their personal finances. From this age, adolescents show a desire to collect money for certain purchases, actively manage their pocket money, dream of having their own business and look for sources of their own income.

The task of parents is to support their children and not criticise their desire to earn their first money. Support their independence and nurture their self-confidence!

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Lyudmila Gulyaeva

Ludmila Gulyaeva is an expert on grants, fundraising and financial literacy.