Steps to Foster Financial Literacy in Children

Financial literacy in children and its development is one of our many parenting tasks. This awareness is crucial for the child's personal development and the enhancement of various skills. In this article, I will explain the importance of developing financial literacy in children from an educational perspective and share my experience with my daughter, detailing how I cultivated her financial education and helped her acquire new skills.

Sawsan Hamzeh
Published on:Feb 13th 2024 |Updated on:Mar 10th 2024
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When Should We Start Educating Children About Money?

Any values we wish to instill in our children should be initiated from a very early age, tailored to the child's age. Financial education can be instilled in a child as young as three years old through simple steps, such as giving the child a small amount of money to buy a treat while shopping with their mother. This helps the child understand the financial value of things. I want to emphasize the importance of using cash and coins as much as possible in front of children so that they know what money is and that plastic cards are not actual money but a convenient means of payment.

In the past, children received a few coins and went to the neighborhood store to buy sweets and juices. This practice cultivated an easy familiarity with using money. Children would know how much money they had, inquire about prices, compare them with their budget, and spontaneously practice addition and subtraction. Today, children no longer go to the neighborhood store; parents buy everything and prepare it at home. Even if a child buys something, parents often pay for it using a credit card or a phone, and the child may not realize that money has been spent.

What Is the Goal of Financial Literacy?

Setting Budgets

For example, when buying clothes for occasions like Eid, parents can pre-agree with the child on a specific budget. The focus should be on purchasing quality clothes at a reasonable price, avoiding the trap of cheap prices, and buying large quantities of poor-quality clothes that will need replacement soon.

Knowing the Value of Things

Taking children shopping, comparing prices, and encouraging them to pay for their purchases with real money will increase their appreciation for the value of things and enhance their economic literacy.

Commitment to Family Financial Values

Explaining the family's financial values to the child and involving them in spending decisions that concern them is essential. Allowing the child to choose what they want to spend money on helps them grow with financial values similar to those of their family. For example, many families prioritize educating their children over buying large houses and luxurious furniture. Sharing these values with children encourages them to adopt similar values and avoid comparing themselves to others.

Setting Priorities

One of my daughters loves buying clothes, and I try to meet this desire as much as possible. One day, she told me that her friend travels with her family, stays in hotels frequently, and wants us to do the same. I pointed out that her friend has only two pieces of clothing, clarifying that her family prioritizes travel and hotels over buying clothes. Since we cannot be two people with two priorities simultaneously, she had to choose between spending money on travel or clothes.

Unveiling and Nurturing a Child's Personality

Raising awareness in children about money, savings, and spending reveals a lot about their personalities. It is crucial for them to learn the value of their possessions, rights, and responsibilities. When we give a child an allowance, and they return from school telling us that their friend borrowed money but hasn't repaid it, it becomes a lesson for the child about financial rights, debt, and the responsibility of returning borrowed money.

Our Children and Saving

Children's personalities differ in spending and saving habits, even growing up in the same household. Some children enjoy saving money, while others lean towards spending all they have. It is essential to start by giving children an allowance and encouraging them to pay it balanced. This way, they do not deprive themselves of buying what they want nor spend everything, leaving nothing saved for future needs.

Can Money be Used as a Reward for Children?

Many parents often ask this question, and the answer is yes. Money may be the best reward we can give a child for positive behavior. Using sweets as a reward can lead to associating pleasure and enjoyment with food, creating an unhealthy relationship where food becomes a source of pleasure rather than a means to satisfy a need.

As for using toys as rewards, since parents often overindulge in buying toys for their children, they no longer hold much value and, in many cases, lose their excitement shortly after getting the toy. The child might compare the new toy with a friend's, finding it not the latest or the best.

Money is the best reward for children because it is an external motivator that helps them develop internal motivation. This, in turn, assists in reinforcing positive habits in children.

My Experience with My Daughter

When my daughter was eight years old, she asked me to give her five dirhams for every book she read, and I agreed. I indeed started giving her five dirhams after completing each book. I spent fifty to seventy dirhams on this agreement, and reading soon became her passion. She never stopped reading books since then. This financial agreement, which didn't cost me much, significantly enhanced her financial literacy. She became more conscious of the value of money. When she saw something priced at 200 dirhams in the store, she would say, "That's forty books!"

This understanding of the value of money encouraged her to save and develop her entrepreneurial skills. She understood profit margins and introductory pricing. She began selling her books after reading them, especially since she is the youngest among my children, and there's no one else to benefit from her books afterward. She started participating in school activities by selling items, with the proceeds going to charity. She managed her sales by offering discounts and promotions to sell items.

Lead by example, Parents!

We are mirrors to our children, and our actions serve as their first guide in life. Parents must adhere to the financial practices they wish to instill in their children. Parents who can afford to spend a thousand dirhams on a dinner should not hesitate to buy their son a pair of expensive sports shoes if they are high quality and worth the price.

Similarly, parents who save all their money and never spend should not discourage their children from spending and buying what they desire. Imitation is more effective than guidance when it comes to children.


Check out Can you make your kids smarter?

Sawsan HamzehCertified Parent Coach and Teenager’s Coach

A mother of three girls, a Pharmacist by education. She worked in marketing for pharmaceuticals and baby food, before realizing that her true passion is helping parents in their parenting journey. She studies in the field of parent coaching and became a certified parent’s coach. She also studies mental and emotional development during different stages of childhood, in addition to the positive role of parenting on this development. She also studies everything related to teenagers’ mental, emotional, and behavioral levels. Then became a certified teenager coach. To help bridge the gap between teenagers and their parents, and build bridges of communication and bonding. In her years of experience in the field of Parenting, Sawsan found that many parenting challenges come from the parent's childhood traumas or societal thinking patterns. Sawsan believes her learning is not over yet, she learns every day from her first teachers; her lovely daughters with whom she lives a wonderful journey of learning, love, and dialogue.

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