At age eleven, Warren Buffett had already made his first investment in the stock market, buying three shares of Cities Service Preferred, which he sold later making a small profit.
Amazed as we see people making steps into managing their wealth, and even investing, already at a very young age, many would wonder how to encourage their own children to become more financially aware. The many benefits there are to teach children about money is becoming forever more obvious, and financial literacy has entered the curriculum in schools – the United Nations even created a manual to help provide financial education to children. Yet, financial literacy within young generations is still low worldwide.
Is there an age that is too young to start?
From as early as two years old, children begin to develop an understanding of money – its value, prices of goods, and the usefulness of money to exchange for things they may want. The UN’s manual suggests that by age fourteen, a young person should already be becoming aware of financial risks, among many other things.
Parents are sometimes reluctant to talk to their children about finances, especially when they are experiencing trouble, perhaps in the same way as parents tend to hide their arguments from the children. However, not talking about it does not mean children do not notice; in fact, a study conducted by Halifax shows that in the UK 88% of children aged between eight to fifteen are aware of their parents’ money issues, and 58% worry about money themselves, while only one third of the parents know that their financial struggles have been sensed by their children.
On the other hand, discussing financial matters with children from a young age would not only let them develop money skills which are so necessary in life, but could also help ease any stress derived from financial worries that could be there.
So, how do young children develop a healthy financial awareness?
“Children’s knowledge of money is directly related to the extensiveness of their experience of money”, says a study, and for many this begins with pocket money.
By having a small amount of money they need to manage themselves, children soon would begin learning to make financial choices such as what to spend money on, how much to save, and even opening an account with which bank would give them the best interest returns.