Money 101

Financial Literacy for Students: It’s Important to Know Why


Financial Literacy for Students: A Guide to Life Beyond the Classroom

As students, we’re often told that financial literacy is important. Yet, many of us go through life without learning about personal finance. Unless you’re lucky enough to have a parent or guardian who is financially literate, chances are you won’t know about money management in school, either. This is a shame because financial literacy is critical. It’s not just about learning how to save and invest; it’s about learning how to live a financially responsible life.

But what does that mean? And why is it so important? Financial literacy is understanding and using financial information to make better decisions. It’s more than just money – it’s about understanding how the financial world works and making intelligent choices to help reach goals. There are a lot of benefits to being financially literate. For one, it can help make better decisions with money. It can also help avoid debt, build good credit, and save for the future.

Financial literacy is especially important for students as it provides them with the knowledge they need to thrive in the world and gives them the confidence they need to make decisions that will impact their future. In these uncertain times, it’s more important than ever to start teaching children financial literacy as soon as they can understand–including teaching them how to handle their finances at school.

However, life goes beyond the classroom, and that is when the real challenges start. Hence, the following text will explain why financial literacy is so important for students and its benefits.

 

What is Financial Literacy? 

Financial literacy is the ability to understand and use economic skills. It includes making sound financial decisions, understanding risks and opportunities, and planning for the future. 

Financial literacy skills are essential for people at every stage of life. Children need to grow up with good money values. It is also important for adults to take care of their families and plan for their future. And it is also important for the elderly who may need more help managing their money in their retirement years. Financial literacy is an essential life skill that enables people to make responsible decisions.

Some people are born with a natural aptitude for financial matters, but most of us must learn financial literacy. Unfortunately, many people never receive formal education in this area, leaving them disadvantaged in managing their money.

Fortunately, many resources are available to help people learn about financial literacy. There are books, websites, and even financial literacy courses. By learning about financial literacy, you can put yourself on the path to financial success.

Financial literacy is a concept that has gained a lot of traction in recent years. However, research shows that even adults do not understand how their spending choices impact their net worth. That is a good indicator of why it is especially important for children to learn about money. These lessons can help them in the future to have an understanding of how to use it responsibly. 

By teaching them financial literacy, kids will know to make better and more informed decisions about their money. A key component of financial literacy is good budgeting skills, which can be taught in various ways, including through debates, exercises, games, and charts. 

 

Why is Understanding Financial Literacy Important?

Each parent remembers the moment when they had to make a financial decision, however small it may be. If you look around, out of five people, three will state that they made a mistake. As a parent, you don’t want your child to venture on the same path, which is why teaching them about money is essential. 

Financial literacy is important because, without it, people are more likely to make mistakes when managing their money. This can lead to financial problems, such as spending too much, not saving enough, and not understanding debt. Unfortunately, a recent study done by FINRA, the Financial Industry Regulatory Authority, has found that 66% of Americans do not have a basic understanding of personal finance.

That means that they are unable to answer questions such as: 

  • How much does a credit card charge? 
  • How do you calculate your mortgage payment? 
  • What is the difference between gross income and net income?

Understanding financial literacy is crucial because it helps students understand the world around them. It can give them an understanding of the different types of financial institutions, how they work and what they do. It will also teach them about how money works in everyday life.

It is important to note that financial literacy is not just about money and finance. It also includes topics like credit, mortgages, loans, and investments. Financial literacy teaches students about these things to know how to deal with their finances and their family’s finances when they become adults.

This is important because it affects every aspect of our lives. For example, financial literacy can help people manage their money better, avoid financial pitfalls, and plan for their future. Another reason is that it will help them to be able to take control of their own lives instead of relying on others to do so for them.

 

How Important is Financial Literacy in a Student’s Life?

The importance of money in our lives cannot be understated. It plays a significant role in our lives and what we can achieve. The moment we step into a store to buy groceries or make a more serious financial decision. Think about it this way: if you want to buy a house, you’ll need to save money for a down payment. If you wish to start a business, you’ll need enough money to cover your initial start-up costs. And if you dream of traveling the world, you’ll need to budget for your trips. In each of these scenarios, money plays a crucial role. 

But how often do we stop and think about how to manage our finances better? Unfortunately, for many of us, the answer is not often enough. Whether we like it or not, money is a fact in life; hence it is imperative in a student’s life. Regardless of their career path, people will need to know how to budget, save, and invest. And by teaching students financial literacy, we can help them make better decisions with their money and set them up for success in the future.

 

Why Educating Students on Money Matters

Money is not just a tool for buying goods and services. It is also a tool for making decisions, setting goals, and solving problems. Students need financial literacy to make the most of their money. The importance of teaching children about money is paramount because they will have the most time to learn about it before they become adults.

Financial literacy does not necessarily mean teaching someone how to balance their checkbook or manage their investments. It’s more about understanding how money works today so that people can make better financial decisions for themselves. It is important to teach students about money matters because it teaches them how to manage their finances and make better decisions.

Financial literacy starts with knowing what you earn and spend and understanding the difference between needs and wants. Students should also be taught topics like taxes, credit cards, loans, investing, and retirement planning; these are all essential to managing money responsibly.

This is why educating students on money matters. By teaching them how to save, and budget, we’re giving them the tools they need to achieve their goals in life. That includes understanding things like:

 

The difference between needs and wants

Needs and wants are the main reason why the budget gets depleted. The needs are the essential spending we cannot do without, for example, groceries, bills, or car expenses. On the other hand, the wants are shopping, vacations, or anything else that is not of existential importance. 

 

How to budget for needs and wants

Budgeting is the basics of financial literacy. It is a relation between income and expenses and having enough money till the next month’s income arrives. Many say it’s a skill, but it is a discipline to monitor the difference between income and expenses. You might have heard about the 50/30/20 budgeting technique. It means dividing income into sections, whereas the majority goes to needs, 30 percent to wants, and 20 percent to savings. 

 

How to save for the future

When summing up the above, we come to long-term savings. That is not an easy task, especially when having unexpected expenses. If you ask a financial advisor, each one will tell you to make an emergency fund for such events. But if students start early and often save during a specific time, their savings will increase significantly. Financial literacy is important because it helps students understand why they should save and spend money in a certain way. It also teaches them how to be financially independent. 

 

How can Parents Teach Children about Financial Literacy at Home?

To raise financially literate children, parents need to start teaching them about money at an early age. Parents can teach their children about financial literacy at home by setting an example, teaching them how to save, and practicing good spending habits. Teaching children about finance can help them make good, intelligent decisions about money as they grow older. 

 

Trip to Grocery Store

Parents can teach their kids how to manage financial resources by giving them limited spending money, how to save, and how to decide between want and need. For example, parents can teach children about money is to providing them with a jar for their allowance. 

For example, you are taking your child into a grocery store and allowing them to choose an item within that budget. In other words, you are allowing the child to make an independent decision and yet not overspend. 

Or, for example, parents could tell their children that they can offer five choices of what to have for dinner and let them choose the option they want. This allows the child to use judgment on how much he thinks is fair for each choice and be responsible for not only his meal but also assisting with the cost of the meal.

This teaches children about saving money and the importance of budgeting. When you look at it, budgeting is the base of financial literacy. 

 

Earning while Completing Tasks

The early teenage years are best for teaching your child how to budget their money. Let’s say you give them an allowance. Why not make it even more valuable through chores. For example, you can set an allowance of two dollars for cleaning their room or five dollars for having good grades. Not only do you teach them how money works in the adult world, but you also make it more valuable as they are working for it. 

People, especially children, tend to spend money they did not work for more quickly than they had to earn. Hence you can use household charts, which they can check, or you can use applications such as BusyKid

BusyKid is an app that aims to teach kids about financial literacy and saving money. The app teaches kids how to save money by letting them earn money for completing tasks like doing chores or making bonus rewards for good grades. Kids can also share their earnings by donating to a good cause. In addition, BusyKid develops work ethic in youngsters by arranging their responsibilities, improving work ethic, and educating them about money management through smartphones.

 

Lead by Example

It is a well-known fact that children copy their parents in whatever way. So, using this information, you can set an example of how to handle money. For example, if you go to a grocery store, explain why you buy a particular product. It is also an excellent opportunity to use it to clarify whether the product is “want” or “need.” 

That relation brings us to a new toy they want. You can use the moment to explain that they cannot purchase new snickers if they decide on a toy. That is the difference between wanting something and needing something. Take money from their savings jar and make sure you give it to the cashier for the toy. That clearly explains that products are not free and that they cost money from their own pocket. 

In addition, if you are deciding on a new appliance for your home, involve your kids in it. Explain the factors that influence the purchase, let them search for it, and come up with three models. Not only did you explain how to buy, but they also felt proud that they had a say in the family-related decisions. It boosts their confidence and independence in the future. Teaching children about money helps prepare them to be financially independent in adulthood.

 

Benefits of Financial Literacy for Students

Students face a new way of life when coming out of school. Being independent does not only imply moving out of the house but rather being able to make an educated decision about life. That includes financial literacy or the ability to maneuver the expenses and budget. 

Frequently, students fall into depression as they cannot deal with the real world and financial side. It can be overwhelming, especially for those that did not have guidance in the matter. Therefore, it is essential because it helps them make better decisions about their future. 

Financially literate people handle their finances more comfortably and have a greater chance of dealing with financial troubles by understanding how to prevent money-related issues as they emerge.

 

Benefits of being financially literate

  • Financial control 

Understanding financial basics gives students more confidence to make financial decisions. It includes reducing expenses through better regulation of finances. Furthermore, making financial decisions means that students do not rely on others to do so.

  • Effective budgeting

Budgeting is the foundation of being financially secure. Because when creating an effective budget plan, there is a clear line that no one should cross. When one understands income and its relation to spending, making a budget plan and sticking to it is easy. 

  • Better quality of life

Having control over finances means having a better sense of the impact of debt on budget. Understanding it means less stress and tools to achieve more. That means being able to set aside wants to make savings for needs in the future. In general, students that know are the ones that succeed in life. 

  • Achieving goals

Everyone has their dream, whether it is a trip around the world, an apartment, or graduating from college. Either way, everything is related to finances. Knowing how to budget and save allows for achieving those goals because these students start to save early on. A clear vision of the future gives an idea of what is needed to achieve it. Hence, these students begin to save with small amounts. 

  • Less stress

Facing the challenges in everyday life can be overwhelming. As often said, money is the root of all these problems. Unfortunately, many people fail to see the solution and fall into stress and anxiety. There is nothing in this world that knowledge cannot solve, including managing finances. 

  • More security

Being financially literate is not just about budgeting but rather knowing how the money world works. Hence, there is less chance of students falling victim to scams and financial frauds that we often see today. 

Financial literacy is important for students to be able to make educated decisions when it comes to their finances. To be fully prepared, they need to know the benefits and drawbacks of certain financial decisions they might take in the future. Therefore, money management is a core topic in financial literacy. This can be done by learning how interest rates work, understanding basic economics, or managing credit cards responsibly. 

Students who know about finances are better able to make decisions about their money and can also be more prepared for the future, as they will better understand how to handle their finances when they enter the workforce.

 

Conclusion: Building a Sustainable Financial Future One Student at a Time

As the world becomes more globalized and interconnected, it is important to understand how to handle your finances. Every day, we see a greater demand for financial literacy education and the tools needed to be financially literate. However, despite the significant progress that many countries across the world have made in improving financial literacy levels amongst young people, there are still substantial challenges ahead.

Parents and schools play an essential role in providing financial literacy education to students. Everything they learn starts from home and expands in school. Parents can make an example for their children by showing them how it works in everyday life. For instance, if they see a parent constantly paying with the card, the child will get used to thinking that it is an unlimited well of resources. They have to understand that money doesn’t grow on trees.

Discipline, such as setting spending limits, can make a significant difference in the long term. Financial literacy education at home is vital to ensure that they understand that they must be careful with money. Hence, financial literacy education is extremely important, especially for students, because it gives them tools to create a better future for themselves.

To build a sustainable future, we need to start with young people who will inherit that future. Students need to understand how to handle both their money and their earnings in the future. They need to know how to budget, spend, and how to save. Students must be given the tools they need to be financially literate and to succeed in careers by teaching them how to manage money responsibly.

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